Exploring the Diverse Paths of Web3 Social - A Flash in the Pan or the Next Mass Adoption?

This article has 12,000 words and an estimated reading time of 10 to 15 minutes.

A few months ago, the popularity of friend.tech once again drew attention to Web3 social, capturing many people's interest and FOMO by assigning a price to the influence of KOLs. The subsequent emergence of Bodhi also attracted considerable attention by assigning value to content, realizing the return of data value. In the realm of social networks, Web3 social seems to be undergoing some new transformations and explorations. With the development of blockchain technology, it is redefining our view of social interactions and providing a range of innovative solutions. Whether it is SocialFi or decentralized social (Desoc), Web3 social is actively exploring the possibilities of future social networks.

Looking back at the development of social products, Web2 social products such as Facebook, X (formerly Twitter), Instagram, and WeChat have provided users with unprecedented convenience for sharing, interacting, and communicating. However, this convenience also hides some dilemmas. Web2 social platforms typically centralize control over user data, lack transparency and privacy protection, and platform governance and decision-making are often controlled by a few centralized entities. Additionally, creator incentives are also a highly controversial aspect of Web2 social products.

At the same time, Web3 social is redefining social networks in a completely new way. Web3 social emphasizes decentralization, user data privacy and control, and incentive mechanisms based on cryptocurrency economics, giving rise to protocols and products such as Lens, CyberConnect, Farcaster, Phaver, Debox, and friend.tech. Concepts like SocialFi integrate finance and social interactions, reshaping the landscape of social networks. Desoc focuses on establishing a decentralized social ecosystem to eliminate many of the issues present in Web2 social networks.

Although the social track has long been expected to be the next mass adoption, it has yet to produce large-scale applications since its inception. What will the future of Web3 social look like? Are the endless stream of social products merely fleeting trends or the next mass adoption? This research report will delve into the core concepts and solutions of Web3 social, analyzing its current development status, advantages, and challenges. We will return to the essence of social interactions, examine the Web3 social domain, reveal its strengths and challenges, and discuss the roles they play in redefining social networks.

As mentioned in Tom Standage's "A Brief History of Social Media," we often think of social media as a new concept that emerged with the development of the internet and digital technology. However, in reality, humans have always engaged in social interactions and information dissemination in various forms. From ancient letters and coffeehouses to modern social networks, the essence of social media has not changed; it has merely evolved in form and technological tools. Social media is an extension of human characteristics, a way for us to continuously pursue connection and communication.

Observing from different historical stages, technology has had a significant impact on the development and evolution of social media, acting as an important driver of change.

Ancient and Traditional Media Period: In ancient times, letters and postal services were the main social media. With the invention of printing, books and newspapers became the primary tools for information dissemination, but the scope of social interactions was limited by geography and communication speed.
Telegraph and Telephone Era: From the late 19th century to the early 20th century, the emergence of the telegraph shortened the time for information dissemination, and the popularity of the telephone changed the way people communicated over long distances, allowing for quicker information exchange.
Broadcasting and Television Era: The 20th century's broadcasting and television media changed the way mass communication occurred, allowing information to be disseminated more widely and shaping cultural, political, and social concepts.
Internet and Web 1.0 Era: From the 1990s to the early 2000s, the emergence of the internet made information dissemination more widespread and instantaneous. The Web 1.0 era was primarily composed of static web pages, with content mainly being a one-way transmission from official sources to users, limiting user participation in content creation and having low social interactivity.
Web 2.0 and the Rise of Social Media: From the mid-2000s to the present, with the rise of Web 2.0, more interactive and user-participatory social media platforms emerged, such as Facebook, X, and YouTube. These platforms provided more user-generated content and social functions, becoming the main tools for daily communication, sharing, and interaction.
Web 3.0 and Decentralized Social: Recently, with the development of blockchain and cryptocurrency technologies, social platforms that emphasize decentralization, privacy protection, and user control have emerged. These platforms aim to address the issues present in Web 2.0 social, such as data privacy, algorithmic filtering, and information authenticity, providing a more secure and transparent social experience.

It is easy to see that humans have had a social need since ancient times. However, at its core, the essence of human social needs has not changed significantly with the passage of time. The core needs can be summarized as follows:

Maintaining Connection and a Sense of Belonging: Social interactions make people feel a sense of belonging, fulfilling emotional and psychological needs, establishing close relationships, and gaining support.
Information Learning and Exchange: Through social interactions, people can share experiences, knowledge, and information, promoting learning, development, and personal growth.
Cooperation and Mutual Assistance: Social interactions help people collaborate and work together to solve problems and achieve common goals.
Social Identity and Self-Expression: Social interactions are a way for people to showcase themselves, establish identity recognition, and gain acknowledgment.

After the mid-2000s, Web2 social media began to flourish. Facebook became a pioneer, offering users the ability to share information, photos, videos, and status updates, allowing them to build social networks. Subsequently, various social platforms such as X, YouTube, and LinkedIn emerged.

Each platform has its unique features and functions. For example, X became an important platform for information dissemination and discussion with its unique instant messaging and social interaction methods. Its 140-character limit quickly spread information, making it a hotspot for news and topic discussions; YouTube, as a video-sharing platform, changed the way people watch and share videos, becoming a widely popular content creation and sharing platform; LinkedIn focuses on professional social networking, providing a professional network for users to establish career relationships, share work experiences, and expand their connections; Instagram, with its powerful image-sharing capabilities and social interactivity, attracted a large number of users, becoming one of the main platforms for photo and video sharing.

In the Web2 phase, there was an emphasis on user participation, interaction, and content generation. Websites transitioned from static information displays to more dynamic and interactive social platforms, enabling users to create and share content, from simple text and images to richer videos, blogs, and profiles. With the development of mobile internet and the popularity of smartphones, people can access social media platforms anytime and anywhere, facilitating more convenient and frequent social activities.

As the user base grew, social media gradually became the main platform for commercial activities and advertising promotion. Businesses and brands used social media to attract users and promote products, leading to a surge in the market value of social projects. Among them, leading company Meta (formerly Facebook) saw its market value soar since its IPO in 2012, surpassing $1 trillion in 2021.

Looking back at the history of Web2 social development, the essence of social needs has not changed; the core change is in providing faster, more convenient, and cheaper services. Facebook allowed people to meet friends and share information more quickly, X enabled quicker access to trending news and interactive discussions (compared to newspapers and television), and LinkedIn transformed workplace socializing from offline introductions to rapid online networking. Essentially, Web2 social products addressed the demand for "speed, quality, and cost" in social interactions.

However, Web2 social also brings some issues, which can be summarized into two core aspects: data ownership and centralization.

Data Ownership: In Web2 social products, user data does not belong to the users themselves but to the platform, leading to many problems.

Privacy Breaches: User data is collected and utilized extensively, leading to risks of personal privacy breaches. Platforms may misuse user data or sell it to third parties, resulting in privacy leaks and data misuse.
Value Not Returned to Users: User data enables social platforms to conduct targeted marketing and other advertising activities, yet users cannot benefit from the revenue generated, leading to platforms profiting from user data without compensation.
Inability to Cross-Platform: Since user data belongs to the platform rather than the users, registering on different social media often requires starting from scratch, and personal social profiles and information cannot circulate across multiple platforms, making each social platform an isolated island.

In the Web2 social environment, many creators report that after generating most of the value, they receive little to no compensation or only a very small portion. While they can establish their IP on social media platforms, they lack ownership and control over the content data and value they create. Once X or YouTube deletes personal profiles, all accumulated content data is lost.

Centralization: In Web2 social products, platforms have unlimited rights to use content.

Weak Censorship Resistance: Since Web2 information is stored on centralized servers, it is subject to political, cultural, and other influences, making freedom of speech unachievable in many countries' apps, effectively depriving users of their rights to express themselves freely. Whether it is the ever-changing rules of X, account bans, or the restrictions imposed by Facebook, TikTok, and WeChat, centralized platforms impose too many limitations and constraints, forcing users to dance under constraints.

Although applications like Longmaoxiang have made efforts in decentralization, many unavoidable issues still exist. While the overall view is decentralized, users still face risks of oppression, abandonment, and prohibition by specific server providers.

In response to the various issues present in Web2 social, Web3 products have begun exploring solutions from multiple aspects, from the protocol layer to the application layer. The Web3 social projects are flourishing, aiming to address different pain points in Web2 social.

From the perspective of the entire Web3 social industry, it can be roughly divided into four parts: application layer, protocol layer, blockchain layer, and storage layer. Social-specific chains provide customized L1 to better serve the needs of social apps, as social applications require more information exchange than financial DApps, thus demanding higher TPS and storage and indexing capabilities; the storage layer is used to store social-related data; the protocol layer provides public development components to help teams build products; and the application layer addresses specific needs by targeting niche scenarios.

As the entire Web3 social track is still in the value verification stage, this research chooses to analyze Web3 social projects from different demand points, aiming for a comprehensive analysis of the current development status of various projects.

Data Value Returned to Users#

In traditional social products, user data is viewed as platform assets rather than the users' own property. In this case, social platforms can utilize the data provided by users for targeted advertising and personalized marketing. Unfortunately, the value of this data has not been reasonably returned and rewarded, making it difficult for users to benefit from the value of their data. In reality, user data contributions are seen as a form of unpaid supply, freely used by the platform, leading to the situation where data is "exploited."

In this model, whether it is the content value created by creators or the personal data provided by users, the majority of the generated revenue is monopolized by social platforms. This centralized control results in minimal returns for users and creators in terms of data value sharing.

New Web3 social products attempt to overturn this model by using token incentives, data NFTization, and other methods to address this dilemma.

Lens Protocol#

Lens Protocol is a decentralized social graph protocol founded by the team behind the DeFi lending project Aave on February 8, 2022, on the Polygon chain. Its most significant feature is that all social graph data owned by users, including personal profiles, content publishing, sharing, commenting, and social relationships, is stored as NFTs.

As a representative protocol in the Web3 social track, more than 200 applications have been built on Lens, with a total ecosystem user count reaching 370,000. The number of monthly active users peaked at over 60,000 in March this year, and the current monthly active users remain around 3,000.

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(Source: Dune)

Lens Protocol has three main features:

Data Value Can Be Traded: In traditional social software, the content and social relationships users post are often valuable but do not receive reasonable incentives. For example, many KOLs on X cannot earn from the quality content itself but must rely on advertising and product promotion, which can negatively impact their reputation. Lens allows user data to be NFTized, turning all accounts into NFTs that can be freely traded in the market. However, since most people in the real world strongly bind their social accounts, the demand for users to trade accounts raises questions about its value.
Data Fluidity: By entering the protocol layer, Lens provides modular components for developers to freely combine and build new social products. Users' personal profiles and all content data are controlled as NFTs through DID. When users log into an application on the Lens protocol, they can synchronize all application data, achieving data fluidity. For example, Lens versions of Twitter and YouTube can achieve data interoperability through a single NFT.
High Degree of Decentralization: The content, social interactions, and identities within the Lens protocol are all on-chain, making it a very crypto-native social protocol.

Based on the Lens protocol, many interesting products have emerged, such as Lenster and Phaver. Lenster is similar in function and interaction experience to X, and can be understood as a decentralized version of X.

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On the other hand, Phaver's model is noteworthy, termed "like-to-earn," where tokens are used to stake quality content. If the staked content receives more stakes later, rewards are given, and the rewards are also shared with the content creators. To prevent users from all staking already popular content, the staking rewards for very popular articles are reduced, encouraging users to act as early discoverers of quality content, somewhat similar to venture capitalists identifying the best targets in the early stages. Overall, it addresses the creator incentive issue, where the value of content depends on user recognition, while also motivating users to continuously seek out good content.

friend.tech#

friend.tech is a recently popular socialfi project that has ignited the market, with a cumulative trading volume reaching 12.48 million, and a single-day peak trading volume of 530,000 on September 13.

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(Source: Dune)

The essence of the friend.tech project is to tokenize personal influence to realize the fan economy:

From the perspective of fans, on one hand, KOL's followers can purchase the KOL's key on friend.tech to join the KOL's private chat group and chat with the KOL they follow; on the other hand, as more people buy the KOL's token, the value of the key increases, and fans can sell it for profit.
From the KOL's perspective, followers pay a 10% transaction fee each time, half of which goes to the KOL. Therefore, as KOLs expand their influence, they also have financial incentives to encourage more people to buy their tokens and earn more fees.

In simple terms, friend.tech realizes the monetization of KOL influence. The more reputable the KOL, the more users buy their shares, increasing their value, and consequently, the purchase price rises, as does the selling price.

The explosive popularity of friend.tech in August and September sparked heated discussions in both domestic and international crypto circles, with many podcasts, videos, and communities discussing related topics. Its success can be attributed to several factors:

Innovative Model: The token purchase of KOL keys to realize the fan economy is a relatively innovative model. Although the economic model remains a Ponzi scheme, KOLs invite people to join, fans purchase, KOLs call again, and fans buy again, creating a smooth positive cycle. KOLs and fans become a community of interest, achieving a mutual benefit (3,3), which is a necessary factor for driving growth.
Capital Boost: friend.tech announced a $50 million seed round financing from Paradigm on August 19, and trading volume quadrupled the day after the announcement, leveraging the backing of top VCs to boost market enthusiasm.
PWA: friend.tech did not adopt a mobile application approach but used PWA (Progressive Web App). By utilizing mobile device web browsers to provide an app-like experience, PWA effectively avoids the need for users to download applications from the App Store or Google Play, as well as the usual fees associated with these platforms, making it a viable strategy for less complex applications.

Additionally, common project cold-start strategies such as invitation code scarcity marketing and user-friendly Web2 login methods contributed to friend.tech's success.

Although friend.tech has shown a downward trend since its peak, its innovative attempts in fan economy and value return to users have inspired many practitioners and project teams.

Bodhi#

Bodhi is a recently emerged and intriguing socialfi project that made a significant splash in the Chinese-speaking region just one day after its launch, with trading volume and participant numbers soaring. On the second day after its launch, its TVL surged to 165 ETH. The author's first article (also the product's white paper) was traded for over $4,000, and it has recently remained above $2,000.

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(Source: Dune)

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(Source: Bodhi Top Assets)

In simple terms, Bodhi's essence is content assetization, similar to friend.tech's KOL reputation assetization. The difference is that friend.tech tokenizes the entire creator's reputation, with each purchase being a transaction of the entire creator's key. In contrast, Bodhi allows for the trading of individual pieces of content created by the creator, thereby expanding the scale of transactions and focusing on specific trading targets. Additionally, Bodhi's content is stored on Arweave, achieving decentralized storage.

As mentioned in Bodhi's white paper, the difficulty of content incentives in Web3 fundamentally stems from the issue of funding public goods. If content is stored on centralized servers, it still faces the risk of disappearing at any time.

If content is stored on-chain and access permissions are set through content payment, encryption and decryption are required. However, most decryption processes still occur on centralized servers, making it fundamentally no different from direct hosting on centralized servers. If decryption is done through blockchain mechanisms, it is essentially still public.

Upon deeper exploration, it can be found that the two important characteristics of on-chain content also determine its status as a public good: anyone can access it, and your access does not affect others' access. Its non-exclusivity and non-competitiveness align with the definition of public goods. Although Bodhi could not maintain its popularity after its explosive growth due to economic model issues, its exploration and attempts at content incentives have brought new innovations to the social field.

Summary of Current Situation Analysis#

Overall, in terms of data value returned to users, both Lens Protocol at the protocol layer and application-based projects like friend.tech and Bodhi are attempting to address this demand from different angles.

Lens Protocol NFTizes user social graph data, allowing personal profiles and content data to be controlled as NFTs and traded freely in the market, creating trading opportunities for high-value accounts. Meanwhile, Lens's modular components provide social DApp developers with data fluidity, enabling user data synchronization and flow across different applications. friend.tech tokenizes KOL reputation, allowing fans to join private chat groups by purchasing KOL's "keys" and gain influence and financial incentives from KOLs. These projects implement value monetization mechanisms, allowing users and creators to share the value of their data and content more fairly.

These new social products return the value of user data to the users themselves and achieve data value fluidity and tradability through various mechanisms. Although projects like Bodhi may face challenges in exploring content incentives, they provide new explorations and attempts for data value feedback in the social field, pushing social platforms toward a more equitable, user-friendly, and innovative direction. In the future, with technological advancements and community progress, as well as the emergence of new incentive curves, Web3 social products will continue to influence social interaction methods, bringing more opportunities and rewards to users and creators.

Censorship Resistance#

In addition to data value incentives, censorship resistance is also a very important focus in current Web3 projects. Traditional Web2 social platforms are often subject to centralized management, leading to various restrictions on content censorship and speech limitations, making people increasingly aware of the importance of censorship resistance. Web3 social tends to be decentralized, reducing reliance on platforms, lowering the risks of censorship and bans, and advocating for more open freedom of speech. Two notable projects in this regard are Farcaster and Nostr.

Farcaster#

Farcaster is a decentralized social protocol that allows developers to create user-centered social applications. The project's founders, Dan and Varun, were both senior executives at Coinbase, and the project has received strong support from Vitalik. Currently, in addition to the Farcaster protocol, the official front-end product Warpcast has been launched, maintaining around 2,000 daily active users and over 40,000 total users.

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(Source: Dune)

Overall, Farcaster has two main characteristics:

Decentralized Identity: Farcaster stores users' identity information on-chain to ensure decentralized identity. Similar to Lens, data is tied to users' identities, making the migration cost for users using various applications within the Farcaster ecosystem very low.
Combining On-Chain and Off-Chain to Improve User Experience: In addition to identity information, Farcaster stores high-frequency data such as user posts and interactions off-chain in the Farcaster Hub, enabling fast data transmission and a better user experience. In some ways, this sacrifices part of decentralization for improved user experience.

From the data perspective, although Farcaster has a smaller user base compared to Lens in terms of daily active users and total users, it surpasses Lens in daily post counts (7,000) and interaction counts (19,000+), reflecting user stickiness. However, both are still in their infancy compared to Web2 social platforms. Additionally, Farcaster's official front-end product Warpcast requires a $1 subscription to use, which may deter some users, especially those accustomed to free products in Web2.

Nostr#

Nostr is an open-source decentralized social protocol developed by an anonymous team, with the core goal of addressing censorship. The founder, Fiatjaf, is a developer of Bitcoin and the Lightning Network.

Nostr employs a unique service framework consisting of clients and "relays." Anyone can become a relay, and relays remain independent, only communicating with users. Each user has a public key and a private key, which can be simply understood as their mailbox address and the key to open the mailbox. Once someone knows another person's address, they can send messages, and the unique private key signature ensures the sender's identity, while the receiver's private key, representing the "mailbox key," ensures they can receive messages.

When discussing the Nostr protocol, the iconic project that cannot be overlooked is Damus. Many readers may have first heard of Nostr through Damus. Earlier this year, former X CEO Jack Dorsey announced Damus's launch on the App Store, and it quickly gained global traction.

Damus operates very similarly to X, with the main difference being its decentralized nature. Built on the Nostr protocol, each user of Damus acts as a client, forming a network of communication through countless relays. As mentioned earlier, anyone can run a relay without permission, making it difficult for X to censor user posts, as users can choose any relay or their own to publish content, maximizing censorship resistance. Although the overall functionality remains quite rudimentary, it satisfies people's desire for freedom.

Recently, Nostr and Damus have experienced some decline, but every time Musk enacts bans or suspensions on X, some Web3 advocates return to the embrace of censorship-resistant social platforms. The explosive popularity of Damus has also made Nostr's developers realize that the demand for censorship resistance is always on users' minds.

Although there are currently no continuously active applications on the Farcaster and Nostr protocols, if we consider Farcaster and Nostr as Layer 1 in the social domain, both are waiting for the next killer application.

Summary of Current Situation Analysis#

In traditional Web2 social platforms, centralized management often leads to content censorship and speech limitations. Platforms like X frequently ban accounts and censor content, increasing people's focus on censorship resistance. Before Web3, products like Longmaoxiang aimed to break through censorship restrictions. With the development of blockchain technology, more Web3 projects are aspiring to create censorship-resistant social projects and protocols similar to X and Facebook.

Both Farcaster and Nostr are noteworthy attempts. Although neither has yet spawned continuously active applications, Farcaster's user engagement and high post and interaction counts indicate user stickiness. However, its subscription model may deter some users, particularly those accustomed to free products in Web2. After the explosive growth of Damus, users did not remain significantly engaged.

However, the explosive popularity of Damus and the overwhelming presence of posts in social circles demonstrate people's natural curiosity and yearning for a Web3 censorship-resistant social product. These projects have introduced new possibilities for Web3 social in their explorations and attempts at censorship resistance, providing more experience and hope for the emergence of the next killer application.

In addition to data value return to users and censorship resistance, blockchain technology has also introduced some native social needs in Web3. Some projects have begun to focus on specific scenarios to address these native social needs. Here, we will mainly introduce the star application in the social track, DeBox.

DeBox#

The core problem DeBox aims to solve is "holding chat." In traditional group chats, whether token or NFT holders and believers, it is challenging to avoid the presence of others in the group chat, leading to potential scammers and malicious short-sellers. DeBox's group chat function can be set to allow only members who hold specific NFTs or tokens and meet a certain threshold to enter the community, thus establishing this consensus.

According to official data released in August this year, DeBox's registered user count exceeded 1.1 million, and user login counts surpassed 13 million. It has gained considerable popularity among Web3 projects, and the recent BOX has sparked discussions.

DeBox initially attracted a large number of users through several NFT sets, using holding as a consensus to gather community members with similar views and ideas, thereby better forming a spontaneous community governance mechanism and reducing information noise. Since content storage and logic are all off-chain, the user experience is relatively good, resembling the experience of using Web2 social products.

In exploring the Web3 social domain, in addition to data value feedback and censorship resistance, blockchain technology has brought a series of native social needs. Addressing these needs has become a focal point for projects. For example, as previously mentioned, DeBox is dedicated to solving the "holding chat" problem by constructing a consensus mechanism for members holding specific NFTs or tokens to enter the community. Thanks to its focus on community governance mechanisms, DeBox has attracted a large number of users, forming a spontaneous community. By using holding as a consensus mechanism, it promotes the cohesion of community members with similar views and ideas, providing a better framework for community governance and reducing information noise.

In addition to DeBox, many projects are approaching the social field from different angles, such as the Cyberconnect protocol, which focuses on building user social graphs, and the official Link3 project, which aggregates users' on-chain and off-chain data, allowing users' off-chain activities to be verified on-chain, thus enriching their social profiles. Mast Network, after launching the X plugin, also introduced the Firefly aggregator, which consolidates content from projects like Lens, Farcaster, and X, becoming a one-stop social platform in Web3.

The emergence of these projects reflects the diversity and innovation in the Web3 social field. With the native scenarios of Web3, they attempt to address various social needs, constructing a more diverse social environment and space.

As mentioned in the projects above, with the development of blockchain technology, many Web3 social projects have begun to attempt to create new solutions, addressing data value return to users, censorship resistance, and building for specific social scenarios. However, most projects remain in a relatively sluggish state. Even if a few projects have gained temporary popularity, they quickly fade away. Web3 social has yet to see large-scale applications, and the challenges and limitations behind this can be summarized in several points:

The Trade-off Between Decentralization and User Experience#

One of the biggest dilemmas facing current Web3 social projects is user experience.

On one hand, the user interfaces and operations of most Web3 social platforms are relatively complex. Compared to traditional Web2 social platforms, some Web3 social projects require wallet logins, which are unfamiliar to Web2 users without wallets, hindering ordinary users from entering Web3 social products and limiting their development and popularity. Additionally, concepts like blockchain and cryptocurrency are still relatively unfamiliar, requiring more education and outreach. Many people lack understanding of how blockchain works and its value, which also affects Web2 users' acceptance of Web3 social platforms. In response, some Web3 social products have adopted Web2 account login methods to reduce barriers to use.

On the other hand, there is a natural contradiction between decentralization and efficiency. If all actions and data need to be on-chain, it can lengthen the paths for user operations and experiences. Various social projects have taken different approaches to development, such as Lens, which puts all content, social relationships, and identities on-chain, while Farcaster opts to only put identities on-chain, and DeBox and friend.tech keep everything off-chain except for NFTs or tokens. Each has made choices regarding user experience and partial on-chain implementation to meet specific social needs.

Putting everything on-chain can lead to cost and speed pressures, while partial on-chain implementations may invite skepticism about "Web2.5" social experiences. Current Web3 projects are still in the exploratory phase of continuously splitting and reorganizing on-chain components. Finding the right balance to satisfy user experience while addressing actual user needs remains a long journey.

Among the social products we commonly use, whether Facebook, X, Instagram, or WeChat, there are high replacement costs. These costs can include time, effort, learning costs, data migration, and re-establishing social networks. Once we have established stable social relationships on a platform, uploaded a large amount of data, and adapted to the platform's functions and interface, we are more inclined to stay on that platform rather than switch to another easily.

The value of a new product is often calculated as (new experience - old experience) - replacement costs. Since the replacement costs for social products are high-frequency usage products, social products exhibit significant network effects. Once a certain number of users become dependent on existing products, the high replacement costs make it difficult for them to switch to other products.

Therefore, if Web3 social projects merely replicate Web2 projects with a few decentralized elements, it will be challenging to attract users to migrate. Especially since ordinary users have a weak perception of decentralized storage but a clear perception of user experience and direct migration costs. Thus, Web3 social products need to innovate more in terms of new experiences and combine different gameplay to meet the differentiated needs from existing products to attract users or become large-scale applications.

Sustainability of Data Value Return to Users#

Due to the financial attributes of the Web3 industry, many Web3 social projects, or socialfi projects, have begun to combine various economic models to accumulate users' influence or content. However, most of the projects that have emerged are still in the Ponzi stage, essentially requiring later participants to buy in for earlier ones, failing to achieve sustainable development, and often evolving into purely speculative endeavors.

Finding a reasonable token economics model and function curve to balance financial attributes and sustainable development is crucial for social products that aim to return data value to users.

From Messari's data, it can be seen that in Q3 2023, the financing data for social projects was around $10 million, significantly lower than the $200 million for DeFi projects and $150 million for gaming projects. In terms of the number of financing projects, there were six social projects, fewer than the 67 DeFi projects and 25 gaming projects. One important reason behind this is the low overlap between the target users of social products and the profiles of Web3 users.

Many users are attracted to the crypto space by the wealth effect, usually carrying speculative and wealth-seeking demands and purposes. In contrast, social requires real users who come here to engage in social behaviors. Unlike other tracks that can attract users through airdrops or TVL boosts, social projects need to attract and retain users with genuine social needs, rather than one-time speculative users.

Compared to the user profiles of social products, many players who love games also possess traits such as gambling and competitiveness. Therefore, GameFi and gaming project teams can attract users from various Web3 platforms, resulting in a higher conversion rate to gaming users. Similarly, DeFi projects can easily attract users with investment and speculation needs, perfectly matching user profiles. The recent explosive popularity of BRC20 inscriptions is also closely related to its significant wealth effect, while the differences in demand between social users and Web3 users are naturally greater than those in gaming and finance, which may also be one reason why the social track appears quieter compared to gaming and DeFi.

Overall, compared to the DeFi and gaming tracks, the target users of social products are further from money, gambling, and competitiveness, resulting in a lower overlap with Web3 user profiles. Attracting target users remains a long-term exploration journey for social projects.

Finally, let's discuss the evolution of the business models of social products.
The evolution of social product business models can be divided into several key stages:

Early Web 1.0 Stage (Late 1990s to Early 2000s): During this stage, social products mainly existed in the form of forums and chat rooms. The business model was primarily based on advertising and membership fees. Some forums earned income through ad displays, while chat rooms charged membership fees. For example, AOL (America Online) charged membership fees for users to access its services, while Yahoo Groups generated revenue through ad displays.
Web 2.0 Social Product Stage (Mid-2000s to 2010s): With the development of internet technology, social media and networking platforms gradually emerged. The business model during this stage primarily revolved around ad displays and user data collection. Social media platforms generated revenue through ad displays and targeted placements, while user data became a valuable asset used for personalized advertising and marketing, with Facebook, X, and TikTok essentially following this model.
The Rise of Web 3.0 (Late 2010s): The advent of Web 3.0 brought the application of blockchain technology and decentralized thinking. Social products began to explore new business models, such as data value feedback, token economies, and NFTization of data assets. Users gained more control over their data and could earn rewards through participation in governance and data sharing. For example, Lens NFTizes data assets, while friend.tech and Bodhi return data value to users by assigning prices to influence/content, and Farcaster still adopts a traditional membership subscription model.

Additionally, due to the regional market environment differences of social products, Web3 social products also have many factors to consider when entering the market. For instance, in the area of data value return to users, a significant aspect is addressing the creator economy issue.

Currently, the primary income model for creators remains ToB-oriented, with ToC as a supplement. Due to the low incentives for content views and clicks provided by many domestic and international platforms, most creators have to choose to accumulate a large amount of traffic resources to earn money from the ToB side through advertising. Some creators have started to explore ToC methods like product promotion, but both income models can negatively impact the creator's brand and reputation. Therefore, many Web3 social projects aim to start from the ToC model, allowing creators to receive appropriate rewards from quality content, which is also the approach of friend.tech and Bodhi (through influence and content incentives).

The difference is that in the domestic market, the traffic of social and creator platforms is highly monopolized, with WeChat, Douyin, and Kuaishou dominating the majority. The platforms are extremely powerful, and creators have low bargaining power, with thin profit-sharing, making it difficult for creators to rely on platform traffic incentives for their livelihoods. Thus, they have to choose ToB models to generate commercial income, including ad placements and live product promotions. However, due to the platform's dominance, it is challenging to direct traffic to private domains. Therefore, domestic creators tend to focus on studying platform recommendation strategies—creating content types that can boost traffic—gaining traction—and then monetizing commercially.
In contrast, the monopolistic situation of social platforms in overseas markets is somewhat better, with relatively higher fluidity of public and private domain traffic (the concept of private domains arose due to the dominance of public domains in the domestic market). Therefore, creators on overseas social media platforms like Instagram and YouTube can direct traffic to their independent sites or webpages after gaining followers, allowing them to sustain themselves. This also enables many overseas creators to create niche content they enjoy relatively freely while effectively directing traffic to private domains.

Thus, in facing the competitive landscape of traditional social products in different regions, Web3 social projects can consider different strategies for their entry.

Overall, the business models of current Web3 social projects are still in a flourishing stage, exploring and validating various business models. Looking back at the history of social products, the evolution of business models shows a trend from a single advertising revenue model and membership income to targeted advertising after data monopolization, and then to returning data value to users through tokens/NFTs. Future development may place greater emphasis on user data value, user engagement, community governance, and more diversified business models.

In the recent wave of technological development, Web3 and AI are two highly regarded star fields. The exploration of social interactions is no exception. In addition to Web3/Crypto social projects, many AI projects have recently emerged, including some traditional Web2 teams that have begun to combine social with AI, with many application scenarios in matching, translation, and virtual personas.

For example, in the domestic market, Soul launched the intelligent dialogue robot "AI Gou Dan" to engage in personalized communication with users. Similarly, Baidu has launched the AI social app "Skyclub" to re-enter the social track using AI. In the overseas market, Meta has increased user engagement by combining AI with social information flow recommendations. Last year's optimization of recommendation algorithms increased Facebook's user retention time by 7% and Instagram's by 6%. The development of social products both domestically and internationally indicates that the combination of social products and AI is an important trend.

AI, as a tool for enhancing productivity, has empowered the social field, particularly in the area of combining social with AI agents, creating virtual girlfriends, boyfriends, and companions to meet human needs for companionship and emotional support. For example, Character.AI, backed by A16Z, can generate human-like text responses and engage in contextual conversations, creating intelligent chatbots to interact with users.

As previously mentioned, one of the core human needs for social interaction is to meet emotional and psychological needs, establish close relationships, and gain support. Currently, AI + social projects primarily focus on fulfilling human emotional needs by providing virtual companionship to address the real-time companionship needs that humans cannot meet. This exploration seeks new possibilities for fulfilling these needs. However, whether human emotional companionship needs should be fulfilled by AI virtual beings is still in a phase of market and value validation.

In the development of social products, we find that Web3 and AI have complementary potential in the social domain. Unlike AI's enhancement of productivity, Web3's characteristics in production relationships and financial incentives can also empower social products effectively. For instance, Binance's incubated Myshell combines AI with Web3, allowing users to create their AI robots, and has launched a voice chat bot, Samantha, based on Telegram to meet human emotional companionship needs. Its token, shell, is used to incentivize the entire product ecosystem, including content consumers paying for features and creators using tokens to increase exposure.

Additionally, there is the recent Siya.AI on the Solana ecosystem, aiming to build a platform for AI and real people to coexist as social companions, hoping to introduce incentive mechanisms for creator economies and AI companions. By combining AI and Web3, it addresses the emotional companionship needs in social interactions. Users can engage in conversations with AI boyfriends and girlfriends, achieving chat mining and NFT incubation.

Overall, as two waves of the new era, AI and Web3 are making strides in the social domain from different angles. The former focuses on emotional companionship and support, while the latter emphasizes data value return to users and censorship resistance, both still in their early stages. Regardless of which demand point they address, they all aim to better satisfy human primal needs for social interaction. In the exploration of social products, the collaboration and complementarity of AI and Web3 have emerged. We eagerly anticipate the birth of the next large-scale social application under the emergence of new technologies and models, where AI and Web3 may collide to better meet the diverse needs of humanity in social interactions.

Conclusion#

Social interaction is a basic need for everyone, regardless of age or familiarity, and social products occupy a significant position in the Web2 industry, being the highest category in DAU. Therefore, since the concept of Web3 social was born, it has always been imbued with hopes for mass adoption by Web3 practitioners.

On the positive side, Web3 social has brought revolutionary changes in data value and user feedback. Compared to traditional Web2 social products, Web3 views user data as a valuable asset, returning the value of data to users through token incentives and NFTization, based on user data sharing, creator incentives, and community consensus.

On the other hand, the censorship resistance of Web3 social products provides users with greater freedom and privacy protection. Through blockchain technology and decentralized characteristics, these products reduce the risks of censorship and bans, advocating for open freedom of speech. This creates a safer and more open social environment for users, making social interactions more genuine and free.

However, current Web3 social products still face some challenges, as large-scale applications have yet to emerge. High replacement costs and network effects pose significant challenges. Traditional social products have established strong network effects among users, making it difficult for them to migrate to new Web3 social platforms due to user habits, resource investments, and platform dependencies. Another challenge is balancing sustainability and user experience. Some Web3 social products emphasize decentralization and data control at the expense of user experience and convenience. Maintaining product usability and attractiveness is crucial for user retention and attraction while pursuing innovation.

As mentioned in Tom Standage's "A Brief History of Social Media," humans have had a social need since the dawn of time, and regardless of how technology evolves, the need for information exchange remains constant. From the papyrus letters used by Roman politicians to exchange information, to pamphlets during the American independence and French Revolution, from newspapers, radio, and television to the internet and blockchain technology, humanity has always undergone transformations in the tension between speed, quality, cost, and freedom of speech versus censorship.

Compared to telephones, text messages, and newspapers, Web2 social products like Facebook, X, and WeChat enable people to communicate and disseminate information faster, better, and cheaper, while the core focus of Web3 lies in censorship-resistant freedom of speech and the return of data value to users. Although there are currently no large-scale applications like those of Web2 products, the demands for censorship resistance and data value return still exist in users' minds, waiting for a moment of explosion.

For future focal points, community attributes can be considered: because social interaction is never a broadcast but always oscillates between centralization and decentralization. Community consensus is a very important characteristic of Web3 social, and the traits of data sovereignty and openness align well with the needs of decentralized communities. Communities can achieve multi-directional, interactive social interactions, which may become one of the future focal points for Web3 social products; additionally, intersections with gaming and other directions may also spark different innovations.

As mentioned in the challenges and limitations of Web3 social, the dilemmas in user profiles in the social track have led to a relatively quiet state compared to the current popularity of the BRC20 track. However, the development prospects of Web3 social still hold many expectations. The continuous emergence of new projects and technologies is pushing this field forward. As technology continues to evolve, we also see more explorations and improvements aimed at sustainability and user experience. This field is maturing, seeking its development path, bringing more innovations to users, and having a profound impact on the entire social domain.

Finally, I would like to express my sincere gratitude to partners like Heitie, Adazz, Ashan, Harlan, and Trinity for their help, as well as to everyone who has been patient and willing to share during our discussions. I genuinely hope that all builders in this track continue to thrive!

Author: Fred

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