Web3 Social: A Fleeting Blossom or the Next Mass Adoption?

Introduction: What Is Web3 Social?

The surge of friend.tech last year has reignited interest in the Web3 social sphere, particularly due to its unique approach to pricing Key Opinion Leader (KOL) influence. This has led to a significant increase in Fear of Missing Out (FOMO) among enthusiasts. Following this, Bodhi's debut also garnered considerable attention by valuing content and facilitating the return of data value. In the domain of social networking, Web3 social represents a phase of novel transformations and explorations. As blockchain technology advances, it is reshaping our understanding of social interactions, introducing a range of groundbreaking solutions. This is evident in both SocialFi (Social Finance) and Decentralized Social (Desoc), where Web3 social actively explores future possibilities for social networks.

Looking back at the evolution of social products, Web2 social platforms like Facebook, X (formerly Twitter), Instagram, WeChat, and others have offered unparalleled ease for users to share, interact, and communicate. Yet, these platforms have inherent challenges. Most Web2 social networks centralize control over user data, often lacking transparency and privacy protection. Additionally, they are typically governed by a handful of centralized entities, leading to controversial debates around creator incentives.

In contrast, Web3 social is redefining social networks in a fundamentally new way. It prioritizes decentralization, user data privacy and control, and leverages the incentive mechanisms inherent in cryptocurrency economics. This has led to the emergence of innovative protocols and products such as Lens, CyberConnect, Farcaster, Phaver, Debox, friend.tech, and more. Concepts like SocialFi blend finance with social networking, transforming the landscape of social interactions. Meanwhile, Desoc strives to build a decentralized social ecosystem, aiming to resolve many of the issues prevalent in Web2 social networks.

Although there has been a longstanding hope that social channels would become the next Mass Adoption, they have yet to achieve widespread application. This raises the question: What does the future hold for Web3 social? Is the growing influx of social products a temporary trend or a step towards mass adoption? This research report delves deep into the fundamental concepts and solutions of Web3 social, examining its current state, benefits, and challenges. It revisits the essence of social interaction, scrutinizes the Web3 social domain, highlights its strengths and challenges, and investigates its potential in redefining social networks.

Why Do We Need Web3 Social?

The Essence of Social Interaction Remains Unchanged Throughout History

Tom Standage's "A Brief History of Social Media" asserts that the concept of social media, contrary to popular belief, predates the internet era. Human beings have always been involved in various forms of socialization and information sharing. From the days of ancient letters and coffeehouses to the modern digital social networks, the core of social media remains constant; only its mediums and technologies have evolved. Social media is an inherent human characteristic, a manifestation of our perpetual quest for connection and communication.

The progress of technology across different eras has significantly shaped the development of social media, acting as a key catalyst for its transformation.

Ancient and Traditional Media Era: Initially, letters and postal services were the primary communication methods. The advent of printing technology introduced books and newspapers, extending the reach of information, albeit within certain geographical and temporal limits.

Telegraph and Telephone Era: In the late 19th and early 20th centuries, the telegraph revolutionized the speed of information dissemination. The telephone further changed long-distance communication dynamics, facilitating quicker exchanges of information.

Radio and Television Era: These media in the 20th century drastically altered mass communication, expanding the reach of information and influencing cultural, political, and societal perceptions.

Internet and Web 1.0 Era: From the 1990s to the early 2000s, the internet ushered in a new age of information distribution, marked by broader and more immediate access. The Web 1.0 era was characterized by static web pages that primarily provided content in a one-way flow from creators to users, offering limited user interaction.

Web 2.0 and the Emergence of Social Media: Since the mid-2000s, the advent of Web 2.0 brought forth interactive social media platforms like Facebook, X (formerly Twitter), and YouTube. These platforms emphasized user-generated content and interactive functionalities, becoming essential tools for everyday communication, content sharing, and social engagement.

Web 3.0 and Decentralized Social: The latest development, fueled by blockchain and cryptocurrency technologies, has given rise to Web3.0 social platforms. These platforms focus on decentralization, privacy, and user control, aiming to overcome the limitations of Web2.0 social networks, such as concerns over data privacy, algorithmic biases, and content authenticity, to provide a more secure and transparent social experience.

Throughout history, the fundamental human need for social interaction has remained constant, despite the changing mediums of communication, from direct conversations to digital platforms. This need encompasses four primary aspects:

Building Connections and Belonging: Social interaction fosters a sense of belonging, meeting emotional and psychological needs, and enabling the formation of close relationships and support networks.

Learning and Exchanging Information: It facilitates the sharing of experiences, knowledge, and information, promoting learning, development, and personal growth.

Collaboration and Mutual Aid: Social interaction is crucial for collaboration, allowing individuals to work together, solve problems, and achieve shared objectives.

Social Identity and Self-Expression: It provides a platform for individuals to express themselves, build their identities, and gain recognition and validation from their peers.

How Web2 Social Catered to the Demand for "Fast, Good, and Economical"

The flourishing of Web2 social media began in the mid-2000s, with Facebook leading the way. It offered a platform for users to share information, photos, videos, status updates, and forge social networks. Following its success, other platforms like X, YouTube, LinkedIn, and others emerged, each with its unique features and functions.

For instance, X, known for its real-time messaging and interactive approach, became a crucial tool for information dissemination and discussion, with its 140-character limit facilitating rapid information spread. YouTube revolutionized the realm of video sharing, becoming a prominent platform for content creation and distribution. LinkedIn specialized in professional networking, providing opportunities for users to build professional relationships, share work experiences, and expand connections. Instagram, with its robust image-sharing capabilities, drew a massive user base, becoming a leading platform for photo and video sharing.

During this era, the focus shifted to user engagement, interaction, and content creation. Websites evolved from static information repositories to dynamic, interactive social platforms where users could create and share diverse content, from text and images to videos, blogs, and profiles. The rise of mobile internet and smartphones further enabled constant access to social media, enhancing convenience and encouraging frequent social engagement.

As user numbers grew, social media increasingly became a primary avenue for commercial activities and advertising. Businesses and brands utilized these platforms for user engagement and product promotion, contributing to the growing market value of social projects. Meta (formerly Facebook), for example, experienced a significant increase in market value after its IPO in 2012, surpassing $1 trillion in 2021.

Reflecting on the development of Web2 social, it's clear that while the essence of social needs remained consistent, the platforms provided faster, more convenient, and cost-effective services. Facebook, for instance, enabled quicker connections with friends and information sharing. X offered speedy access to trending news and interactive discussions, a step up from newspapers and TV. LinkedIn transformed workplace socialization, shifting it from offline interactions to quick online networking. In essence, Web2 social products successfully addressed the "fast, good, and economical" aspects of socialization, meeting the evolving demands of users in an increasingly digital world.

Challenges in Traditional Social Media: The Predicaments of Web2 Social

Web2 social media, despite its advancements and widespread adoption, has introduced several significant challenges, particularly in the realms of data ownership and centralization:

Data Ownership Issues in Web2 Social Platforms:

Privacy Breaches: A major concern in Web2 social media is the extensive collection and utilization of user data, which poses risks of personal privacy breaches. Platforms might misuse this data or sell it to third parties, leading to privacy violations and potential data abuse.

Value Exploitation: While user data enables social platforms to conduct targeted marketing and advertisements, the users often do not benefit from the revenue generated. This situation leads to a scenario where users' data contributions are exploited for the platforms' financial gain, without appropriate reciprocation to the users themselves.

Data Portability Limitations: In the Web2 ecosystem, user data is owned by the platform, not the users. This means that when registering on different social media platforms, users often have to start from scratch, as their social identity and information cannot be transferred across different platforms. This lack of data portability results in isolated "data islands" for each platform.

Creators on these platforms often find themselves in a predicament. They generate significant value through their content but lack ownership and control over their content data. Deleting personal data on platforms like X or YouTube can lead to the loss of all accumulated content, highlighting the lack of control creators have over their intellectual property.

Centralization and its Implications:

Censorship Vulnerability: The centralized storage of information in Web2 social media leads to limitations on freedom of expression. Political, cultural, and other influences can dictate content moderation, often resulting in censorship. This issue is prevalent in platforms like X, Facebook, TikTok, and WeChat, where sudden changes in platform rules, account suspensions, and other restrictions confine users within imposed limitations.

Challenges in Decentralized Alternatives: Although applications like Mastodon attempt to address these issues through decentralization, there are still unavoidable problems. While they may offer a degree of overall decentralization, specific server instances can subject users to risks such as provider authoritarianism, abandonment, or restrictions on other users, indicating that true decentralization is challenging to achieve.

These challenges highlight the underlying predicaments within the traditional Web2 social industry. Users and creators are often at a disadvantage due to the centralized control of data and the platforms' overarching authority, leading to calls for more decentralized, user-centric solutions in the social media landscape.

Web3 Social Industry Product Analysis

In response to the array of challenges presented by Web2 social media, the Web3 social industry has embarked on a journey of innovation and exploration, encompassing everything from foundational protocols to application layers. This burgeoning sector is characterized by its diverse range of projects, each designed to address specific pain points associated with Web2 social interactions.

The Web3 social landscape can be segmented into four distinct layers, each playing a crucial role in the ecosystem:

Application Layer: This layer is focused on addressing specific needs in various segmented scenarios. It involves the development of user-facing applications that provide direct social media functionalities. These applications are tailored to meet the unique demands of users in the Web3 space, offering a more decentralized, user-centric experience.

**Protocol Layer: **The protocol layer serves as the backbone for these applications, offering public development components that assist teams in building their products. It acts as the foundational framework upon which Web3 social applications are constructed, providing essential building blocks for decentralized social media platforms.

**Blockchain Layer: **The blockchain layer underpins the entire Web3 social infrastructure. This layer is particularly important for social-specific chains that customize Layer 1 (L1) protocols for social applications. Unlike financial Decentralized Applications (DApps), social applications demand higher throughput (TPS), enhanced storage capabilities, and more sophisticated indexing features to accommodate the greater volume of information exchange inherent in social interactions.

**Storage Layer: **This layer is crucial for housing social-related data. It is where the vast amounts of data generated by social interactions are securely stored. The storage layer ensures that this data remains decentralized, tamper-proof, and accessible, addressing the privacy and ownership issues prevalent in Web2 social platforms.

As the Web3 social track is currently in the phase of value verification, this study aims to conduct a thorough analysis of various Web3 social projects, categorizing them based on their approach to fulfilling different social needs. This comprehensive analysis seeks to understand the development status of these projects and how they collectively contribute to reshaping the landscape of social media in the era of Web3.

Data Value Benefiting Users in Web3 Social Products

In traditional Web2 social products, user data is typically treated as an asset of the platform, not of the user. This leads to issues like privacy breaches and value exploitation, where users contribute data but don't receive adequate compensation. Essentially, users' data is freely used and often exploited by platforms for targeted advertising and marketing, without benefiting the users.

Web3 social products are attempting to change this dynamic by implementing token incentives, data NFTs, and other strategies to ensure users benefit from their data contributions.

Lens Protocol

The Lens Protocol, developed by the Aave team in February 2022 on the Polygon chain, represents a significant shift in how social graph data is managed and utilized. This decentralized social graph protocol uniquely stores all aspects of users' social interactions — including profiles, content, sharing, comments, and social relationships — as Non-Fungible Tokens (NFTs).

As a standout in the Web3 social space, Lens boasts over 200 applications built on its protocol, with a total ecosystem user count of 370,000. Its peak monthly active users surpassed 60,000 in March, and it currently maintains around 3,000 monthly active users.

Source: Dune

Lens Protocol is distinguished by three main features:

Tradable Data Value: In traditional social media, user-generated content and social connections hold significant value, but this is rarely passed back to the users. Lens Protocol addresses this imbalance by tokenizing user data. Each user account is transformed into an NFT, which can be traded in the market. However, the real-world attachment of users to their social accounts means that such transactions are not common, leading to questions about the actual demand for trading social accounts.

Data Circulation: Lens Protocol facilitates the construction of novel social products by providing modular components for social DApp developers. It allows personal profiles and all content data, represented as NFTs and controlled via DID, to be synchronized across applications within the Lens ecosystem. This ensures seamless data circulation, exemplified by the ability of Lens versions of platforms like Twitter and YouTube to interchange data through NFTs.

High Decentralization: In the Lens ecosystem, everything from content and social interactions to user identity is stored on-chain. This high degree of decentralization makes Lens a distinctly crypto-native social protocol.

Several innovative products have emerged based on the Lens Protocol, including Lenster and Phaver. Lenster mirrors functionalities similar to X (formerly Twitter), providing an experience akin to a decentralized version of the platform.

Phaver, on the other hand, introduces a unique "reward through likes" model. In this system, users stake tokens on high-quality content, with rewards shared between stakers and content creators. This model incentivizes the discovery and support of quality content early on, addressing the creator incentive problem by tying content value to user engagement and approval.

friend.tech

friend.tech, a notable SocialFi project, has recently experienced a surge in popularity, evidenced by its impressive trading volume of 12.48 million and a record single-day volume of 530,000 on September 13th.

Source: Dune

At its core, friend.tech innovatively tokenizes individual influence to cultivate a fan-driven economy:

Fan Perspective: Followers of Key Opinion Leaders (KOLs) can purchase a KOL's "key" on friend.tech, granting them exclusive access to the KOL's private chat group and interactions. As the demand for a KOL's token increases, so does the value of the key, enabling fans to potentially profit from its resale.

KOL Perspective: Each transaction made by followers incurs a 10% fee, with half of this fee going directly to the KOL. This system incentivizes KOLs financially, as their expanding influence and follower base translate into higher transaction fees and increased revenue.

Essentially, friend.tech has developed a model where the influence value of KOLs is monetized. As KOLs gain more reputation and their shares are bought by more users, their value appreciates, leading to higher buying and selling prices.

The rise in popularity of friend.tech, especially during August and September, has sparked widespread discussions in the global crypto community. This interest can be attributed to several key factors:

Innovative Model: friend.tech's model of buying KOL keys with tokens to create a fan-driven economy is groundbreaking. Although it bears some resemblance to a Ponzi scheme, the cycle of KOL endorsements and fan purchases creates a positive feedback loop. This synergy between KOLs and fans fosters a mutually beneficial community, propelling the project's growth.

Capital Injection: The project received a significant boost when it announced a $50 million seed round funding from Paradigm on August 19th. Following this announcement, the trading volume surged, fueled by the backing of a top-tier venture capital firm.

PWA Implementation: Opting for a Progressive Web App (PWA) over a traditional mobile app, friend.tech provides an app-like experience through web browsers on mobile devices. This strategy circumvents the need for app store downloads and associated fees, particularly beneficial in simpler application scenarios.

Additionally, friend.tech's use of invitation code-driven marketing and user-friendly Web2 login methods are strategic moves typically employed in project bootstrapping, contributing to the project's momentum.

Despite experiencing a decline after reaching its peak, the innovative approach of friend.tech in creating a fan-driven economy and sharing value with users has been a source of inspiration for many professionals and project teams within the industry.

Bodhi

Bodhi, a recent addition to the SocialFi sphere, has swiftly captured attention, particularly within the Chinese-speaking community. It has demonstrated remarkable growth in trading volume and user engagement. Remarkably, within just two days of its launch, Bodhi's Total Value Locked (TVL) escalated to 165 ETH. Adding to its achievements, the project's foundational article, doubling as its whitepaper, reached a peak trading value of over $4000 USD and continues to maintain a value above $2000 USD.

Source: Dune

Source: Bodhi Top Assets

Bodhi's primary focus is on the assetization of content, which parallels friend.tech's approach of tokenizing the reputations of Key Opinion Leaders (KOLs). However, Bodhi differentiates itself by trading individual content pieces created by a user, facilitating more targeted transactions and potentially higher transaction volumes. Additionally, Bodhi employs decentralized storage solutions by storing its content on Arweave.

Highlighted in Bodhi's whitepaper is the challenge surrounding content incentivization within the Web3 framework, particularly concerning the nature of public goods. When content is stored on centralized servers, it's at risk of being lost or removed. On the other hand, storing content on a blockchain and regulating access through content payments introduces the need for encryption and decryption processes. This presents a dilemma, as most decryption processes are still handled by centralized servers, undermining the decentralized ethos. If decryption were to be managed by blockchain mechanisms, the content effectively becomes publicly accessible.

On closer inspection, content stored on-chain exhibits two fundamental characteristics of a public good: universal accessibility and non-rivalrous consumption, meaning one person's access doesn't diminish another's. These aspects pose a significant challenge for content monetization and exclusivity within the blockchain domain.

Despite its initial success, Bodhi has faced challenges in maintaining momentum, primarily due to issues with its economic model. Nonetheless, its foray into content assetization and the exploration of novel incentivization methods in the Web3 environment mark significant advancements in the social media landscape, contributing new perspectives and possibilities to the domain.

Current Analysis Summary:

The current landscape of Web3 social products, encompassing both protocol layers like Lens Protocol and application domains such as friend.tech and Bodhi, is actively addressing the need for fair user data value distribution from various angles.

Lens Protocol: This protocol adopts an NFT-based model for users' social graph data. It allows personal profiles and content to be controlled via Decentralized Identifiers (DIDs) and traded freely in the market. This approach not only facilitates the creation of a market for high-value accounts but also enhances data liquidity. Lens Protocol's modular components aid social DApp developers in synchronizing and circulating user data across different applications, promoting interoperability within the Web3 social ecosystem.

Friend.tech: In contrast, friend.tech focuses on tokenizing the influence of Key Opinion Leaders (KOLs). It enables fans to access private chat groups and conversations by purchasing a KOL's "key." This not only allows fans to engage more closely with the KOLs but also provides them with the opportunity to benefit financially from the increasing value of these keys. Friend.tech's model establishes a unique fan-driven economy, aligning the interests of fans and KOLs.

Bodhi: While tackling the aspect of content assetization, Bodhi trades individual content pieces, offering a more targeted approach to transaction and value realization. Although it faces challenges, especially in the realm of content incentivization on decentralized platforms, Bodhi's model represents an innovative effort in returning value to content creators.

Overall, these emerging Web3 social products are pioneering new ways to redistribute the value of user data and content. By implementing mechanisms that enable data circulation, tradability, and fairer sharing of value, they are setting a precedent for more equitable, user-centric, and innovative social platforms. As technology continues to evolve, alongside growing communities and the development of new incentive structures, Web3 social products are poised to significantly reshape the dynamics of social interactions, offering enhanced opportunities and benefits for users and creators alike.

Anti-censorship

The shift towards anti-censorship is a key focus in current Web3 projects, addressing the centralization issues like content censorship and speech restrictions commonly faced by traditional Web2 social platforms. Web3 social platforms lean towards decentralization, reducing reliance on centralized entities, thus minimizing censorship risks and advocating for more open freedom of speech. Two notable projects in this realm are Farcaster and Nostr.

Farcaster

Founded by former Coinbase executives Dan and Varun, and supported by notable figures like Vitalik Buterin, Farcaster is a decentralized social protocol for developing user-centric social applications. The official frontend product, Warpcast, maintains around 2,000 daily active users with a total user count exceeding 40,000.

Source: Dune

Farcaster’s key features include:

Decentralized identity, ensuring user identity information is stored on the blockchain, akin to Lens Protocol. This facilitates easy migration across various applications within the Farcaster ecosystem.

On-chain/off-chain hybrid model to improve user experience, using Farcaster Hub for storing high-frequency data. While this approach slightly compromises decentralization, it enhances usability.

Despite lower daily active users and total user counts compared to Lens, Farcaster's engagement metrics, such as daily postings and interactions, are higher, indicating strong user involvement. However, Farcaster's subscription model for Warpcast could be a barrier for Web2 users accustomed to free services.

Nostr

Nostr, an open-source decentralized social protocol, was developed by an anonymous team led by Fiatjaf, a notable developer in the Bitcoin and Lightning Network communities. Its primary aim is to provide a robust anti-censorship platform.

The unique architecture of Nostr includes a network of clients and "relayers." Relayers, functioning independently, facilitate direct communication with users. Every user possesses a public and private key, with the private key securing access and verifying the sender's identity through unique signatures.

A flagship application of Nostr, Damus, gained considerable attention, especially following an endorsement from former X CEO Jack Dorsey. This led to heightened global interest upon its release on the App Store.

Damus operates similarly to platform X, but its defining feature is its decentralized nature. Built on the Nostr protocol, each user on Damus serves as a client, connecting through a network of relayers. This decentralized structure allows anyone to run a relayer, significantly reducing the risk of official censorship compared to platforms like X. Users enjoy the freedom to choose any relayer, including their own, for content publication, thus enhancing censorship resistance. While Damus maintains basic functionality, it effectively fulfills a growing demand for freedom of expression.

Despite a recent slowdown in Nostr and Damus, episodes of censorship and controversial actions on platforms like X tend to revive interest in Web3 anti-censorship networks. Damus's initial surge in popularity highlighted the ongoing user demand for platforms resistant to censorship.

Current Analysis Summary

Traditional Web2 social platforms often suffer from content censorship and speech restrictions due to centralized control. This has increasingly spotlighted the necessity for anti-censorship measures. Preceding the rise of Web3, platforms like Mastodon sought to circumvent these limitations. Now, with the advancement of blockchain technology, more Web3 projects are aspiring to develop social platforms and protocols that are resistant to censorship, in the vein of platforms like X and Facebook.

Both Farcaster and Nostr represent significant strides in this direction. While neither has yet produced continuously active applications, Farcaster's high engagement levels, despite its smaller user base compared to Web2 platforms, show potential. However, its subscription model might hinder wider adoption. The initial popularity of Damus on the Nostr protocol indicated a strong user interest in anti-censorship solutions, although this did not translate into sustained engagement.

Nevertheless, the buzz generated by Damus and the general interest in anti-censorship solutions underscore a persistent curiosity and demand for Web3 social products that champion freedom of speech. These projects, through their innovative approaches against censorship, are opening new pathways for Web3 social interactions and fostering hope for the emergence of groundbreaking applications in the future.

Native Social Scenarios Enabled by Web3

Blockchain technology in the Web3 era has gone beyond the primary concerns of data value feedback and anti-censorship to address a variety of inherent social demands. Numerous projects are strategically focusing on specific social needs that have emerged with this technological evolution. A key player in this realm is DeBox.

DeBox: Enhancing Community Engagement

Addressing the "Holding Chat" Issue: In traditional social platforms, distinguishing between genuine token holders or NFT enthusiasts and potential scammers in group chats can be challenging. DeBox innovatively addresses this by implementing criteria for group chat access, such as owning specific NFTs or holding certain amounts of tokens. This ensures that only genuine community members participate, fostering a more secure and focused discussion environment.

Growing Popularity: As of August, DeBox reported over 1.1 million registered users and more than 13 million logins, indicating its rising popularity within the Web3 community. The platform has been particularly noted for its BOX feature, which has been a subject of significant discussion.

Community Building Through Holding Consensus: DeBox kickstarted its user base by integrating multiple NFT sets, attracting a diverse range of users. By using holding as a consensus mechanism, it gathers community members with common interests, enabling spontaneous community governance and reducing irrelevant information within discussions.

Broader Web3 Social Spectrum

Cyberconnect Protocol: Focused on building user social graphs, Cyberconnect is tailoring the social experience to the unique landscape of Web3.

Link3 Project: Link3 aggregates users’ on-chain and off-chain data, offering a more enriched social profile by validating off-chain activities on the blockchain.

Mast Network and Firefly Aggregator: The introduction of the X plugin by the Mast Network and the subsequent launch of the Firefly aggregator represent significant steps in amalgamating content from various Web3 platforms like Lens, Farcaster, and X. This results in a comprehensive and integrated Web3 social platform.

These emerging projects exemplify the diversification and innovation that are defining the Web3 social domain. Each project, including DeBox, Cyberconnect, Link3, and others, is addressing different social interaction needs unique to the Web3 environment. This is leading to the construction of a more diverse and rich social landscape, meeting various native social demands of the Web3 era. These developments signify a shift towards more nuanced and user-centric social experiences in the blockchain era.

Why is Web3 Social Media Comparatively Less Popular Than Other Tracks?

Despite the innovative efforts in data value feedback, censorship resistance, and catering to specific social scenarios, Web3 social media platforms have not yet achieved widespread popularity. There are several key challenges and limitations contributing to this phenomenon:

Balancing Decentralization and User Experience

Complex User Interfaces: Many Web3 social platforms have interfaces and operations that are more complex compared to traditional Web2 platforms. This complexity, often involving wallet logins, can be daunting and obstructive for Web2 users who are not familiar with wallets, thereby hindering their transition to Web3 social products.

Educational Barrier: The concepts of blockchain and cryptocurrencies are still relatively unfamiliar to a large segment of potential users. This lack of understanding affects the adoption of Web3 platforms, as users are often hesitant to engage with technologies they do not comprehend fully. To mitigate this, some Web3 projects are incorporating Web2 account logins to lower entry barriers.

Decentralization vs. Efficiency: There is an inherent conflict between the ideals of decentralization and the practicality of efficient user experience. For instance, if all actions and data require on-chain processing, it can lead to a slower and more cumbersome user experience. Projects like Lens have placed all content, social relationships, and identities on-chain, while Farcaster has chosen to store only identities on-chain. Others, such as Debox and friend.tech, keep most data off-chain, except for crucial elements like NFTs or tokens. This variation in approach highlights the struggle to balance user experience with the level of on-chain activity.

Cost and Speed Considerations: Implementing full on-chain processes can be costly and slow, which may detract from the user experience. Conversely, only partially utilizing on-chain features might lead to a "Web2.5" experience, which may not fully align with the decentralized ethos of Web3. Web3 social projects are continuously exploring ways to strike a balance between these factors, aiming to effectively address user needs while providing a satisfactory user experience.

High Replacement Costs of Social Products

The migration cost for users of established social products like Facebook, X, Instagram, or WeChat is notably high. This cost isn't just financial; it encompasses time, effort, the learning curve involved in adapting to a new platform, data migration, and the challenge of rebuilding social networks. Users who have invested considerable time in establishing their presence on a platform, uploading substantial data, and familiarizing themselves with its functionalities and interface, are generally reluctant to switch to another platform easily.

In evaluating the value of a new social product, one could say it equals the new experience minus the old experience, further subtracted by the replacement cost. Given the strong network effects of social products, where users build dependencies on specific platforms, the high replacement cost poses a significant barrier to switching. This factor makes it challenging for new platforms, particularly those in the Web3 space, to attract users from established Web2 platforms.

Therefore, for Web3 social projects to successfully draw users, mere replication of Web2 features with added decentralization is not enough. Regular users may not fully grasp the benefits of decentralized storage, but they clearly understand user experience and the tangible costs of migration. Hence, to entice users and gain widespread adoption, Web3 social products need to offer innovative experiences and unique features that distinctively meet user demands, differentiating themselves from existing Web2 products. This requires more than just technological innovation; it calls for a deep understanding of user needs and preferences, and the creation of compelling new reasons for users to make the switch.

Sustainability of Feedbacking Data Value to Users

The challenge of sustainability in rewarding data value to users is a significant issue for many Web3 social or "socialfi" projects. These projects often incorporate various economic models to leverage user influence or content. However, most of them are currently in a phase that resembles a Ponzi scheme, where the financial sustainability depends on new users funding the returns of earlier users, rather than generating intrinsic value. As a result, these projects struggle to achieve sustainable development and often become speculative ventures.

To navigate this challenge, finding a balanced token economics model and a functional curve is essential. Such a model should harmonize the financial aspects of the platform with sustainable development, ensuring that social products can feasibly reward users for their data contributions over the long term.

Low Overlap Between Social Media Target Users and Web3 User Profiles

The disparity in funding and project numbers between social projects and other sectors like DeFi and Gaming in the Web3 space reflects a crucial underlying issue: a low overlap between the target users of social media and the typical profiles of Web3 users. According to Messari's data from Q3 2023, social projects received around $10 million in funding, significantly less than the $200 million for DeFi projects and $150 million for Gaming projects. Moreover, the number of social projects was substantially lower, with only 6 compared to 67 DeFi projects and 25 Gaming projects.

This disparity is partly because many individuals are drawn to the crypto space with motivations centered around wealth creation and speculation. Genuine social media, on the other hand, relies on authentic user engagement in social activities. Unlike other sectors that can attract users through financial incentives like airdrops or boosts in Total Value Locked (TVL), social projects aiming to fulfill real social needs must attract and retain users genuinely interested in such interactions, not those driven by short-term speculative gains.

The profile of gaming enthusiasts, often characterized by a propensity for risk-taking and competitiveness, aligns more closely with Web3's typical user base, making them a more natural fit for conversion into gaming users. Similarly, DeFi projects appeal to investment-minded individuals. In contrast, the natural differences in needs and motivations between typical social media users and the Web3 community make it more challenging to align the two. This divergence in user profiles and interests is a key factor in why the social track in Web3 seems less vibrant compared to gaming and DeFi sectors.

In summary, the target audience for social media differs significantly from the money-driven, risk-taking, and competitive tendencies often seen in DeFi and Gaming users. Finding ways to align with and appeal to the target audience for social media remains a critical, ongoing exploration for Web3 social projects.

Social Media Business Models

Finally, let's delve into the commercial aspects of the Metaverse's business model.

The evolution of social product business models can be divided into distinct stages, each with its own unique characteristics:

1. Early Web 1.0 Phase (Late 1990s to Early 2000s):

During this period, social products predominantly took the form of forums, chat rooms, and similar platforms. The primary revenue sources were advertising and membership fees. Some forums generated income through displaying ads, while chat rooms charged users membership fees. For example, America Online (AOL) required a membership fee for access, and Yahoo Groups generated revenue through ad displays.

2. Web 2.0 Social Media Phase (Mid to Late 2000s to 2010s):

As internet technology advanced, social media and networking platforms gained prominence. The business model during this phase mainly revolved around ad displays and the collection of user data. Social media platforms generated revenue through ads and targeted advertising. User data became a valuable asset used for personalized advertisements and marketing. Platforms like Facebook, X, and TikTok predominantly operated under this model.

3. Emergence of Web3 (Late 2010s):

The arrival of Web3 brought blockchain technology and decentralized concepts into the picture. Social products began exploring novel business models, such as data value feedback, token economics, and NFT-based data assets. Users gained more control over their data, allowing them to participate in governance and receive rewards for sharing data. For example, Lens tokenizes data assets into NFTs, platforms like friend.tech and Bodhi assign value to influence and content, providing users with a stake in the value, while Farcaster still adheres to the traditional subscription-based model.

Additionally, when introducing Web3 social products, it's crucial to consider regional market variations inherent to social products. One significant aspect of this is addressing the economic challenges faced by content creators.

Currently, the primary income model for creators still largely revolves around Business-to-Business (ToB), with Consumer-to-Consumer (ToC) playing a secondary role. Many platforms, both domestic and international, offer relatively modest incentives for content views and clicks, which forces content creators to rely on amassing substantial traffic to attract advertising revenue from the ToB side. Some creators have started experimenting with ToC approaches like e-commerce, but both income models can have negative impacts on the creators' brand and reputation. Therefore, many Web3 social projects aim to begin with a ToC model, allowing creators to directly receive fair compensation for high-quality content. This approach is also followed by friend.tech and Bodhi, which employ influence and content incentives.

However, there is a difference in approach. In the domestic market, social and creator platforms face significant traffic monopolization. Platforms like WeChat, TikTok, and Kuaishou dominate the majority share, wielding substantial control and offering creators limited bargaining power with minimal revenue shares. Consequently, Chinese creators often find it challenging to sustain themselves solely through platform-based traffic incentives and often turn to ToB models for business income, including advertisements and live-streamed product endorsements. However, due to the platform's dominance, redirecting traffic to private domains is challenging. Therefore, Chinese creators tend to focus on studying platform recommendation strategies, producing content types that generate higher traffic volumes, and then monetizing that traffic.

In contrast, the monopolistic situation for social platforms in overseas markets is slightly better than in domestic markets. There's relatively more fluidity between public and private domain traffic, while in China, the concept of the private domain emerged due to the overwhelming dominance of the public domain. Consequently, creators on overseas social media platforms such as Instagram and YouTube, once they amass followers, can redirect traffic to their independent sites or web pages to sustain themselves. This freedom enables many overseas creators to create niche content they enjoy, which also seamlessly redirects to their private domains.

Facing distinct competition patterns of traditional social products across different regions, Web3 social projects should consider employing diverse strategies when entering the market.

Overall, the business models of current Web3 social projects are still in a phase of diverse exploration and validation. Looking back at the history of social products, the evolution of business models has transitioned from a single advertising revenue model and membership income to precise advertising after data monopolization, and now to the trend of returning data value to users through tokens/NFTs. The future direction may emphasize user data value, participation, community governance, and more diversified business models.

Exploration of the Future of Social: Collision Between Web3 Social and the AI Wave

In the midst of rapid technological advancements, two prominent domains, Web3 and AI, have emerged as significant players in shaping the future of social interactions. This holds true as we explore the evolving social landscape. Alongside the growth of Web3 and Crypto social projects, we've witnessed a surge in AI projects. Even traditional Web2 teams are now integrating social platforms with AI technology, finding diverse applications in matchmaking, translation, and the development of virtual personas.

For example, in the Chinese market, Soul has introduced "AI Guodan," an intelligent conversational AI designed for personalized user interactions. Similarly, Baidu has launched the AI-powered social app "Skyclub" to re-enter the social arena with the added dimension of AI. On the international front, Meta has integrated AI into social feed recommendations, significantly enhancing user engagement. Last year, algorithm refinements increased user engagement on Facebook by 7% and on Instagram by 6%. These developments in both domestic and international products underscore the importance of amalgamating social platforms with AI.

AI, as a tool for boosting productivity, has found fertile ground in the realm of social interactions. A noteworthy area of exploration involves merging social platforms with AI agents to create virtual companions, fulfilling human needs for companionship and emotional support. For instance, Character.AI, backed by A16Z, generates human-like text responses and engages in contextual conversations, creating intelligent chatbots for user interaction.

As mentioned earlier, one of the fundamental human needs in social interaction is the fulfillment of emotional and mood-based requirements, establishing intimate relationships, and receiving support. Currently, AI + social projects primarily focus on addressing these emotional needs, venturing into uncharted territory to explore whether AI-driven virtual entities can fulfill these needs in real-time. The market is still in the process of validating the demand and value of human emotional companionship provided by AI.

In the evolution of social products, we observe that Web3 and AI possess complementary potential in the social domain. Unlike AI's role in enhancing productivity, Web3's characteristics in production relations and financial incentives empower social products in unique ways. For instance, Myshell, incubated by Binance, combines AI with Web3, enabling users to create their AI bots. It has introduced Samantha, a Telegram-based voice chatbot, to address the need for human emotional companionship. The ecosystem's token, shell, incentivizes consumers to pay for features and creators to gain exposure through token usage.

Furthermore, Siya.AI, within the recent Solana ecosystem, aims to construct a social companionship platform coexisting with AI and real individuals. It seeks to make AI agents an entry point for internet and Web3 users, introducing incentive mechanisms for creator economies and AI companions by integrating the SDK provided by Realy. Through the fusion of AI and Web3, Siya.AI aims to fulfill emotional companionship needs in social interaction. Users engaging in conversations with AI companions can also participate in chat mining and NFT incubation.

In summary, AI and Web3, as two transformative waves of the new era, are making distinct contributions to the realm of social interaction. AI focuses on emotional companionship and support, while Web3 emphasizes returning user data value and resisting censorship, both of which are in the early stages of development. Regardless of their specific focus, the overarching goal is to better satisfy humanity's fundamental social needs. As we continue to explore the world of social products, collaboration and complementarity between AI and Web3 emerge. There is great anticipation for the emergence of the next major-scale social application, driven by these new technologies and models. Perhaps, the convergence of AI and Web3 in the social domain will spark innovations that more effectively cater to the diverse social needs of humanity.

Conclusion

Social interaction, a fundamental human need transcending age and circumstance, serves as the gateway to Web2's industry, boasting the highest Daily Active Users (DAU). Since the inception of Web3 social concepts, there has been immense anticipation among Web3 practitioners for widespread adoption.

On a positive note, Web3 social platforms herald revolutionary changes in terms of data value and user feedback. In stark contrast to traditional Web2 social products, Web3 treats user data as a precious asset, employing token incentives and NFTs to return the value of data to its rightful owners. This is underpinned by the principles of user data sharing, creator incentives, and community consensus.

Furthermore, the censorship resistance inherent in Web3 social products bestows upon users greater freedom and enhanced privacy protection. Harnessing blockchain technology and decentralization, these platforms mitigate the risks of censorship and bans, advocating for the unfettered freedom of speech. This creates a safer, more open social environment, fostering authenticity and freedom in social interactions.

However, present-day Web3 social platforms encounter challenges and have yet to achieve widespread adoption. Formidable obstacles include high replacement costs and the formidable network effects established by traditional social products. The entrenched network effects among users make it arduous for them to transition to new Web3 social platforms, owing to habituation, resource investments, and platform dependence. The struggle to replicate the success of Web2 products hampers the expansion and growth of Web3 platforms. Balancing sustainability with user experience is another challenge. Some Web3 social products prioritize decentralization and data control, sometimes at the expense of user convenience and experience. Striking the right balance between innovation and user-friendliness is critical for ensuring user retention and engagement.

Tom Standage's book, "Writing on the Wall: Social Media - The First 2,000 Years," underscores the enduring human need for social interaction. Regardless of technological evolution, humans consistently yearn for information exchange. From ancient Roman politicians using papyrus for communication to pamphlets during the American Independence and French Revolution, and from newspapers, radio, and television to the internet and blockchain technology, the human quest for a balance between speed, quality, economy, freedom of speech, and censorship remains unyielding.

While Web2 social products like Facebook, X, and WeChat offer faster, better, and more affordable communication and dissemination compared to telephones, text messages, and newspapers, Web3's core focus is on resisting censorship and restoring data value to users. Although Web3 has not yet achieved the widespread adoption of Web2 products, the demand for censorship resistance and data value return continues to simmer in the minds of users, awaiting a breakthrough moment.

Looking to the future, the attribute of community looms large. Social interactions are not unidirectional broadcasts but rather oscillate between centralization and decentralization. Community consensus is a pivotal facet of Web3 social, and the characteristics of data sovereignty and openness align seamlessly with the aspirations of decentralized communities. Communities have the potential to facilitate multidirectional interactive social engagement and may well represent a future direction for Web3 social products. Furthermore, the intersection and integration with other domains, such as gaming, have the potential to ignite fresh waves of innovation.

Despite the challenges and limitations faced by Web3 social, particularly in user profiling, it remains a beacon of hope for many. Emerging projects and technologies continually propel progress in this field. As technology continues to advance, we witness ongoing explorations and enhancements in terms of sustainability and user experience. This field matures continually, seeking its unique development path, introducing ever more innovation to users, and exerting a profound influence on the broader social landscape.