The Web3 social ecosystem can be divided into the following parts: infrastructure, middleware, applications, and tools.
*Key Points
*introduction
* Unfair profit distribution
*Forgotten data and identities
*Closed ecosystem
*Binance Research focuses on monitoring innovation in the following areas:
·Mobile Applications:
Crypto-native innovation:
Connection with Web3 scenarios:
*1. Infrastructure
* So
*Crossbell
*2. Middleware
*Lens Protocol
*Farcaster
*CyberConnect
*RSS3
*in conclusion
*3. Application
*social media
*Community
* Instant Messaging
*4. Tools
*Community Tools
*Instant messaging
*5. Concluding Thoughts
Source: SevenUpDAO Overseas Returnees Association
Author | Binance Research
Source | MarsBit
*Reprinted content is only for learning and communication.
*Original link: https://research.binance.com/static/pdf/Web3_Social_%20Road_to_Mass_Adoption.pdf
*Copyright belongs to the original author
*Disclaimer: This article does not constitute investment advice. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances and comply with the relevant laws and regulations of the country and region where they are located.
Key Takeaways
Compared to Web2, Web3 social core provides three main unique utilities:
First, asset creation and shared ownership: Web3 social applications can use blockchain to create a shared ownership structure with their users.
Second, open data and identity: the data and credentials accumulated on the chain are shared across the entire ecosystem.
Third, a composable ecosystem: dApps built on smart contract blockchains such as Ethereum are inherently composable, allowing developers to build on existing applications in a permissionless manner.
The Web3 social ecosystem can be divided into the following parts: infrastructure, middleware, applications, and tools.
Infrastructure: The project is trying to provide infrastructure customized to meet the needs of social applications.
Middleware: Most of Web3’s latest innovations are built on existing ecosystems. Middleware protocols build on this existing infrastructure and are designed to be the intermediary between blockchains and applications by querying, organizing, and presenting data to application developers.
Applications: Web3 social applications are a diverse portfolio of products that are suitable for different scenarios. Prominent forms include social media, community-based applications, and instant messaging products.
Tools: Unlike applications, tools are a set of products that leverage the interoperability of Web3 and design their products to be “portable” across different platforms and blockchains.
Currently, Web3 social networking cannot directly compete with Web2 social networking in terms of user experience, and to succeed, it needs to provide unique and innovative utilities. We are monitoring innovations in the following areas:
Mobile Apps: A large portion of social activity happens on mobile, and we look forward to more innovation on this platform.
Crypto-native innovation: We believe that the future of mass-adopted web3 social products will only come from those that use blockchain primitives to provide transformative experiences for users.
Connection with Web3 scenarios: Successful Web3 products can also come from solving Web3 native scenarios, such as on-chain community management.
0 Preface
Today, more than 4.65 billion people use social media worldwide, equivalent to 58.7% of the world's total population. Web2 social media companies provide a way for people to easily connect with friends and family and allow people to tap into a huge user base, which makes them incredibly profitable. For example, Meta, the global leader in social media, has a user base of nearly 30 billion and a net income of $39.3 billion in 2021, with a net profit margin of approximately 33.38%.
However, Web2 social media platforms suffer from several drawbacks:
Unfair profit distribution
Users are the main group of content creators on social media, but the value they create is not rewarded. Platforms, by controlling distribution algorithms and attention flows, are able to profit from user-generated content without sharing it with users.
Forgotten data and identities
Once users have established their social relationships in one app, the cost for them to switch to another app is high. As a result, new innovations in this field are naturally suppressed, and users face the fragmentation of their identities and experiences across different apps.
Closed ecosystem
The major Web2 platforms all benefited from a vibrant developer ecosystem in their early days, but once they gained enough traction, they closed down the ecosystem to prevent others from stealing their data and users. In the development of social media, a monumental event was the shutdown of Twitter’s developer API due to concerns about the sharing of data.
Using blockchain technology, Web3 social applications have the following three value propositions to solve the above problems:
① Asset creation and ownership
Rather than relying on indirect monetization (i.e., advertising), Web3 social applications can use blockchain to create shared ownership structures with their users. This can be accomplished by issuing fungible tokens or non-fungible tokens (“NFTs”) to foster a sense of community and/or ownership.
② Open data and identity
Public and private key pairs are not only a way to protect assets, but also create a sovereign, consistent identifier across different platforms. The data and credentials accumulated on-chain are naturally interoperable with every application built on top of the blockchain.
③ Composable ecosystem
Blockchains like Ethereum are not only ledgers for asset transfers, but also open, transparent and trustless software development platforms. DApps are inherently composable and can serve as building blocks for other applications.
Web3 applications and protocols have made meaningful explorations along these three directions. Based on the technical architecture and customer situation, we divide these projects into the following categories:
infrastructure
middleware
application
tool
We will analyze these sectors with some highlighted items in the rest of the report.
1. Infrastructure
Most Web3 social applications are built on public first layers (“L1s”) like Ethereum, but there are also some notable attempts to provide customized infrastructure to meet the needs of social applications. Compared with other dApps, social applications require faster transaction speeds and greater bandwidth, as well as cheaper media storage, which may be difficult to achieve on general-purpose L1s. Therefore, there are some social-specific L1s that stand out for their high transaction speeds and cost-effective on-chain storage. However, decentralization is sacrificed to a certain extent.
So
DeSo is a L1 blockchain built for social media platforms with the vision of providing all three social value propositions of Web3 simultaneously. DeSo claims that with its own version of Proof-of-Stake, it will eventually be able to achieve over 1,000 TPS (transactions per second) and accommodate up to approximately 30 million users. With built-in NFT and social token capabilities, users can easily create and monetize token-based communities, and the blockchain itself becomes a shared data ledger and composable developer platform.
However, building a custom L1 is a double-edged sword. While it allows for fast transactions and low content storage costs, it loses valuable connections to existing dApp and identity ecosystems on chains such as Ethereum. Since the token launch in June 2021, there have been no widely popular consumer applications based on the DeSo ecosystem.
Crossbell
Crossbell is a new social L1 developed by the team behind RSS3. Compared to DeSo, it takes a different approach, focusing on providing a shared content storage platform. As an Ethereum sidechain, Crossbell is currently free to use, and it has built a content feed and user profile system.
Highlights from an interview with Crossbell
Vision - Joshua Meteora, founder of RSS3 and Crossbell, believes that the core spirit of Web3 is decentralization, which should not be sacrificed for user experience. The customized L1 eliminates the efficiency limitations of existing blockchains and provides a better user experience through a sufficiently decentralized technology stack. In addition, the interoperability between Crossbell and the Ethereum ecosystem enables it to benefit from rich content and identity systems, and the sidechain architecture allows efficient execution and cheap storage.
2. Middleware
Middleware is a protocol built using existing infrastructure and is designed to act as an intermediary between blockchains and applications by querying, organizing, and presenting data to application developers.
We will introduce four well-known social middleware protocols in this section. Although they all aim to build a better social application system, they each take a different approach. The above table captures the differences in their technical architectures.
Lens Protocol
Developed by the team behind Aave (the largest lending platform on Ethereum), Lens Protocol is one of the most well-known social protocols. Similar to DeSo, all content, interactions, and user profiles are stored on-chain, but Lens is built on Polygon and is therefore able to interact with the existing Ethereum ecosystem. It has the following features:
Unforgeable nature — User profiles, posts, and even people followed are represented as NFTs.
The first benefit is efficient monetization: a social media influencer can sell her posts or her entire profile with a single click.
Additionally, because NFT standards are interoperable and accepted by numerous marketplaces and applications, relationships and content on Lens can be easily accessed and displayed on other platforms without the need for additional technical integration.
Built-in composability — The Lens Protocol is a flexible software development kit (“SDK”) that allows application developers to build on it in different ways. For example, a developer could modify the “Follow” module to make users pay a specific price for following someone, or add a voting mechanism for an account’s followers.
Currently, there are more than 50 applications built on the Lens Protocol and approximately 60,000 Lens handle holders.
Figure 1: Daily active users of Lens from August to October 2022
However, this on-chain architecture also requires frequent wallet signatures, which disrupts the user experience. Currently, the amount of content and social relationships on Lens Protocol cannot be compared with Web2 social media. According to on-chain analysis, in the past few months, the number of daily active users of Lens ecosystem has reached several thousand.
Farcaster
If Lens takes a technology-first approach, Farcaster takes a user experience-first approach. While everything built on Lens, including user identity, content, and social relationships, is on-chain, in the Farcaster ecosystem, content and social relationships are stored on centralized servers (or “hubs”), so users don’t need to worry about paying gas fees or signing signatures.
So how are applications on Farcaster different from Web2 applications? Farcaster gives each user a sovereign, on-chain identity. Based on the principle of full decentralization, even if the centralized server operator wants to block a specific user, others can still find and contact this person through their on-chain identity. Farcaster will provide a template for self-hosted Hubs for these users.
The main application on Farcaster is the Farcaster app, a Twitter-like application with native features of cryptocurrencies such as on-chain activity tracking, NFT profiles, NFT post-collection, etc. In order to maintain a good community atmosphere, the Farcaster team strictly controls the flow of users. There are currently a few hundred active users. It will be interesting to observe whether the community and user experience can be maintained as the ecosystem expands.
CyberConnect
As a social graph protocol, CyberConnect aims to provide a one-stop data solution for developers of Web3 social applications. Web2 social media platforms store all social relationships on their servers, and CyberConnect aims to become a public database for different applications, thereby achieving greater interoperability between applications.
For example, a user transitioning from App A to App B will find their friends, followers, and other synced social data seamlessly carried over to the new app along with their ID. CyberConnect is also incubating its own consumer apps. It recently released Link 3, a Web3 version of Linktree with event planning capabilities.
Currently, CyberConnect has an ecosystem of over 70 projects, including not only social media applications but also DIDs, communication protocols, and community management applications. According to the latest update, the total number of users with CyberConnect identity registrations is 1.49 million, and the number of API calls is 22.22 million.
RSS3
RSS is a Web1 standard that allows people to subscribe to any feed on the Internet without relying on centralized servers. While the success of RSS has been overshadowed by Web2 content platforms, RSS3 aims to support efficient and decentralized information publishing in Web3 by leveraging the best features of RSS. In essence, RSS3 is a protocol that aggregates on-chain and off-chain content sources in a decentralized manner.
Currently, RSS3's main product is its data API, which queries all content-related data on Web3 and returns it to developers. The number of requests per month has exceeded 200 million. On the client side, RSS3 has also built a search engine and subscription service for users to subscribe to content-related updates, such as mirror articles, or posts on other decentralized social media platforms.
in conclusion
Based on scale and valuation, social middleware is one of the most influential projects in the Web3 social space. The reason is simple: it is probably the industry sector with the most network effects. Without isolated social data to lock in users, applications must constantly compete for users' attention, and protocols, as tools for developers, have higher migration costs.
However, without applications, protocols themselves are useless. For example, projects like CyberConnect and RSS3 have a large number of API calls, but they have not yet been able to turn this developer activity into consumer adoption. Therefore, all of the above protocols are actively cultivating application ecosystems, and most of them are building applications themselves. In the next section, we will explore the Web3 social applications that have been built.
3. Application
The previous sections shed light on projects that take an infrastructure-first approach. In this section, we explore projects that take a product-first approach. A fundamental argument for these product-first protocols is that social behavior is closely tied to their respective scenarios, which requires a front end to explore product-market fit rather than just building infrastructure in the dark. Ideally, iterations of the product will inform the design specifications of its social protocol so that other developers can start building more dApps on top, eventually forming an ecosystem.
social media
An interesting observation is that many middleware projects are building their own native social applications. Farcaster, a project discussed in the previous section, is iterating on both its protocol and a Twitter-like social media application simultaneously. Most of Farcaster’s functionality is not built at the protocol level, which allows Farcaster to better understand user preferences through experimentation and improve functionality at a faster pace. A functioning product also helps to onboard the first adopters, as well as showcasing the capabilities of the underlying protocol to potential external developers. The Farcaster application is currently in invite-only Beta mode.
Figure 2: Sample dashboard for Farcaster
Early productization may have the potential risk of lack of universality of the protocol. The user logic behind each major social application is different given its target users and use cases. If the ultimate vision is to develop a protocol-based ecosystem, there is an inherent dilemma between more flexibility on the middleware side and more specificity on the product side. It is important to distinguish between the ecosystem of independent products and the ecosystem of other add-ons.
The Web3 technology stack introduces new implementations of trust and verifiability that could potentially transition social profiles from mere presentation to actual proof of one’s identity. This space is still in its infancy, but we expect more emerging innovations that will add solid value to users. In addition to Farcaster, we have identified several other projects based on our research and public information:
Context A platform for observing the wallets of friends, influencers, DAOs and celebrities.
Lenster is a permissionless social media network built using the Lens Protocol.
Light Explorer for curating and discovering social interactions around NFTs, DAOs, POAP, and DeFi.
Orb is a professional social media app built with Lens Protocol.
Community
In addition to social media applications, other projects tap into the private traffic space by catering to online communities. One of their basic arguments is that in Web2, the demand for acquaintance networks and creator-fan engagement is not met, and today's consumers would rather spend time "passively" swiping short videos on TikTok than "actively" communicating with friends on Instagram or Facebook. In addition, the business model of short content recommendation prioritizes advertising revenue rather than fan royalties, which leads to inefficient implementation of the fan economy.
While many large fan bases (musicians, brands, sports clubs, etc.) are slowly entering Web3 by issuing NFTs, there is currently a lack of a comprehensive toolchain that can both migrate users to Web3 at scale and integrate Web3's utility seamlessly into existing Web2 applications. One of the early projects we interviewed, Niche, is trying to solve this problem by building an application that uses tokens as a gateway to community ownership.
Highlights from an interview with Niche
Vision — To usher in a new era of ecosystem-centralized ownership. By focusing on ownership models through DAOs, Niche can add value to content creators, neighborhood groups, small businesses, and more.
Product Features — The price of the token fluctuates based on the market demand to join a specific community. The ultimate goal is to incentivize active participation, allowing users to have conversations and form real connections in an intimate circle.
In addition to Niche, we identified several other projects based on research and public information:
The homepage of the Bonfire community, equipped with gated airdrops of social tokens, events, content, merchandise, and participation rewards.
The CrowdPad platform enables the launch of social tokens and built-in community feedback and chat features.
RareCircles No-code tools for creating NFTs and custom experiences for brands, creators, events, and entertainment.
Superlocal is a local social network that allows users to earn NFTs and share their experiences wherever they go.
While token threshold is no longer a new term, its potential to solve Web2 inefficiencies remains relatively untapped given the growing popularity of NFTs and DAOs. We found several pain points waiting to be turned into opportunities:
Barriers to adoption
Migrating to a new app with new mechanisms is a pretty big commitment for the existing community. There needs to be a smooth and practical user journey from discovery to engagement to monetization.
Fuzzy moat
A simple way to quantify the value of an application is the difference between the old and new experience minus the switching cost for the user. Many projects are adopting Web2-like user interfaces to reduce switching costs, but they ignore the first part of the equation.
User education
There is still a long way to go before users understand the concept of community ownership. Given that Web2 communities are often partially moderated by platforms behind the scenes, it may take time for users to become familiar with the new mechanism.
Instant Messaging
Bringing Web2 users to Web3 is not the only goal of decentralized social applications. Some projects are starting by tapping into Web3’s native social scene: online discussions around tokens, trading, and portfolios, which currently happen primarily on Discord and Telegram.
BlockscanChat — A platform created by the team behind Etherscan that enables users to message each other between wallets.
gm.xyz - A Reddit-like platform for community management and building a user-owned social network.
Nansen Connect — a messaging platform designed to facilitate more effective cryptocurrency-related conversations by leveraging the data and hashtags generated by Nansen.
Wallet Connect Chat — A direct messaging protocol that allows users to message 1-1 with other wallet users in the WalletConnect network.
In the aforementioned project, we interviewed Nansen Connect to get a more thorough understanding of this vertical and its products.
Nansen Connect Interview Highlights
Vision — Nansen Connect’s vision is to become the go-to platform for the crypto community to discuss alpha and trading opportunities, while avoiding the spam and noise of Discord channels. Connect is currently in closed beta, open to some communities, and the team plans to introduce more Nansen features.
Product Features — The product features automatic token thresholds for channels and Nansen tag-based user profiling to keep users safe during online conversations related to transactions with another account.
What’s next? — Connect is currently in closed beta, open to some communities, and the team plans to introduce more Nansen features.
One of the biggest challenges of any Web3 messaging app is the switching cost. For the average user, Discord may be full of noise, but it is still convenient. On the other hand, scams and hacks are quite a headache for projects and community managers, as the hack of one channel can easily damage the overall reputation of the project. The Web3 technology stack introduces new implementations of verifiable identities, which may change the way online conversations are conducted, especially in financial activities such as purchases, transactions, and trade. This field is still in its early stages, but we expect more emerging innovations that will bring solid value-added to users.
Tools
We distinguish between applications and tools to highlight social projects that leverage the interoperability of Web3 and design their products to be “portable” across different platforms and blockchains.
Participation, identity and reputation
Tokenization is a common approach. For example, Rally enables developers to mint social tokens to integrate into applications and help communities design their own economies. The supply of RLY tokens is capped at 15 billion, minted entirely in the 2020 token generation event. RLY is used as a reserve currency for social tokens launched in the ecosystem by leveraging the protocol's token bonding curve smart contract.
Figure 3: RLY market value year to date
Following a similar logic, Roll allows users to mint their social tokens in the ERC 20 standard with a maximum supply of 10 million. These tokens are designed to have a vesting period to ensure that issuers and holders are aligned over the long term. Roll then profits from holding 1% of the maximum supply of the social token issuer.
Rally and Roll are among the top players in the social token vertical, which is still in its very early stages. Many other projects have emerged to help communities issue tokens or badges for various causes. For example, the Proof of Attendance Protocol (“POAP”) enables users to issue and receive free POAP badges as a way to record online and offline experiences, especially event attendance. Galxe helps projects automatically issue on-chain credentials in the form of NFTs to incentivize and reward certain user behaviors. On the backend, data curators are rewarded when the credentials are used in Galxe’s application modules, its oracle engine, or API.
Although tokenization of social activities and identities is no longer a new narrative in the Web3 social space, there is still a long way to go before mass adoption. We found several pain points waiting to be turned into opportunities:
The utility of ambiguity
It is unclear whether tokenization incentivizes actual participation or is simply a speculative exercise to get whitelisted for an airdrop.
Fragmented User Experience
While monetization is a key focus of tokenized projects, the user journey starts before and ends after the monetization part. Tokens should embrace interoperability not only in terms of the underlying technology stack, but also in terms of the end-to-end user experience.
Lifespan
Unlike the subscription model, tokens can be held forever without a viable exit strategy, especially when the token is tied to some utility or benefit. After all, designing a functional economy is harder than just issuing tokens.
Community Tools
Unlike standalone applications, community-focused tools can serve as a backend to manage the presence of a community across a variety of applications. For example, Guild is an automated membership management tool that enables platform-agnostic DAOs, creators, and influencers to manage access to their communities and offer exclusive rewards or incentives.
Highlights from the Guild interview
Product Features — Community managers can use Guild to specify access requirements for off-chain (Twitter followers, Github contributions, etc.) and on-chain (NFTs, tokens, etc.) data. They can grant roles and issue rewards in the form of permissions or capabilities to those who meet the requirements. Given the diversity of Guild's target users, the team is focused on supporting more integrations and potential use cases, with the ultimate vision of becoming a general middleware layer for community management.
Usage — As of September 2022, Guild had approximately 200,000 registered users.
One notable vertical for community tooling is collective investing. Ian Lee, co-founder of Syndicate, believes that collaborative investing will be one of the first verticals to see mass adoption of Web3 social applications. Web3 social applications have the potential to make the asset management process more collaborative, transparent, and seamless compared to Web2.
Highlights from an interview with Syndicate
Vision — By combining decentralized identity (“DID”) and NFTs with investment DAOs, Syndicate aims to transform the investment industry by doing what YouTube and TikTok did to the content creation industry: lowering the barrier for users to start investing together and ultimately unlocking a new paradigm of relationship-based investing.
Product Update — In September 2022, Syndicate launched “Collectives”, an original product for social networking and community building built on ERC-721 M (“M” stands for “modular”), turning ERC-721 into an on-chain social network and community platform. The product prioritizes composability and a capital-focused network, which are two of the most unique value propositions of Web3 from the team’s perspective.
Usage — By the end of September, over 900 collectives had been formed (university groups, angel investors, etc.), attracting over 80,000 users in closed and open beta. By October 2022, the cumulative investment on Syndicate had reached nearly 4,000 ETH.
Figure 4: Cumulative investment in Syndicate (ETH)
In addition to Guild and Syndicate, we identified several other community tool projects based on research and public information:
Boomerang — CRM for communities that tracks and controls members across platforms.
Coinvise — Tools for creating personal or community tokens, facilitating airdrops, and enabling community members to earn money.
Highlight — A no-code tool for minting NFTs, building membership communities, and engaging with fans.
Instant messaging
While messaging in Web2 typically occurred within a specific platform, the composability of Web3 opens up new opportunities for platform-agnostic communication.
Highlights from the Convospace interview
Protocol Description — Convospace is a decentralized conversation protocol that allows users to comment and chat with each other across different dApps.
Vision — Similar to the concept of Uniswap, but in a social setting, Convospace aims to aggregate the liquidity of cross-platform conversations to enable a richer Web3 social experience.
Usage — The protocol had approximately 185,000 unique users in September 2022.
In addition to Convospace, we identified several other projects based on research and public information:
XMTP — A secure messaging protocol and decentralized communication network.
Dialect — A protocol for dynamic, composable dApp notifications and wallet-to-wallet chat.
ECHO — A permissionless tool for collecting, saving, and displaying comments.
5. Concluding Thoughts
In our research into the Web3 social space, we have observed promising innovations along these lines, many of which offer concrete utility not possible via Web2. However, we have yet to see killer apps emerge, and the path to mass adoption is unclear.
Currently, the Web3 social landscape we see has great limitations:
There are limited scenarios where Web3 social provides a user experience that goes beyond the Web2 experience.
The limited on-chain social data or content provided to users does not enrich the DID/social media ecosystem.
Our view is that Web3 social cannot currently compete directly with Web2 social in terms of user experience. Rather than competing directly with Web2 applications, it is wise to leverage its unique ecosystem in DeFi, NFT and other verticals to provide users with unique and innovative utility tools.
Currently, Web3 social cannot directly compete with Web2 social in terms of user experience. To succeed, it needs to provide unique and innovative functions.
We are also keeping a close eye on potential innovations in the following areas:
Mobile apps. Due to the flexibility of the browser ecosystem, most apps are currently focused on desktop. For various reasons, there is less development on mobile. However, more social activities happen on mobile, and we look forward to more innovation on this platform.
Crypto-native innovation. Many current Web3 social products are replicas of Web2 products. We believe that truly adopted social products will only come from products that use blockchain-native technology to provide users with transformative experiences.
Integrate with existing scenarios in Web3. Successful Web3 products can also come from solving problems in Web3 native scenarios. For example, we need to provide innovative solutions in Web3 community management, token and credential distribution, and other scenarios where Web2 solutions are insufficient or non-existent.
It’s still unclear which vertical of Web3 social will take off, and currently, even the major Web3 social products lack traction compared to their Web2 counterparts.
However, we believe that in the long run, Web3 social will outpace Web2 for a simple reason: while Web2 applications accumulate data on their own, it has a superior network effect. While Web2 products accumulate data in an isolated manner, Web3 applications consume and contribute to a shared data ledger, and therefore enjoy network effects at the ecosystem level, rather than at the application level as with Web2.
We will see what the right combination of protocols and applications is that will enable this vision.
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