Author: STEVEN SHI
Compiled by: Kxp, Blockbeats
Earlier this year, Twitter abruptly shut down third-party apps. Weeks later, it eliminated free API access, and its cheapest plan now costs $42,000 per month.
By now, most users have adapted to this reality. Our most important social media apps, from Facebook and TikTok to WeChat and Grab, are centralized platforms. While these platforms are generally docile, they occasionally exercise power in capricious ways that highlight centralized authority, such as censoring and banning users based on vague content policies or arbitrarily elevating certain users.
These platforms are essential to our daily lives. As a result, users are frustrated with the status quo but don’t have many options. Therefore, decentralized social media is a key focus in the Web3 movement. Since the Crypto industry runs on Twitter, building a “decentralized Twitter” is more attractive to Web3 founders because they are well aware of Twitter’s pain points.
This report explores decentralized social (DeSoc) protocols. We review various DeSoc designs and focus on interesting projects. We also analyze the pros and cons of each protocol's approach and outline our views on the entire vertical.
The value of social graphs
Since its founding, Twitter has raised $4.4 billion in capital in 19 rounds of funding. When it went public, it had accumulated losses of nearly $1 billion. However, the product itself has barely changed in the past five years.
However, Twitter is still extremely valuable, with a valuation of at least several billion dollars. If it were auctioned today, there would undoubtedly be a large number of buyers willing to bid for Twitter's revenue at a generous valuation.
The key value of Twitter and any social media platform lies primarily in its social graph. Features are commodities (see: Clubhouse’s Spaces, Snapchat’s Stories, TikTok/Douyin’s Short Videos). But a unique and differentiated social graph is extremely valuable, and it’s what allows niche platforms to grow and maintain share amid fierce competition (e.g.: Bilibili, GitHub, LinkedIn, Twitch). Conversely, a weak social graph frustrates users and leads to a death spiral (e.g.: Clubhouse, MySpace, Friendster, Vine, Renren, YY, Digg).
Incumbent platforms noticed this early on and captured value by locking users in. As a result, most users are locked into incumbent platforms with few viable exit options.
Decentralized social networks promise to return value derived from the social graph to users. The overall argument suggests that this approach eliminates rent-seeking behavior and promotes more competition in products and features, ultimately creating value for users.
The Promise of Decentralized Social Networks: Censorship Resistance and Ownership
One of the most obvious benefits of building the DeSoc protocol is open access. Decentralized social networks should allow two users to find each other and communicate with each other, even if all other users want to prevent such communication. These networks should also allow users to publish content and find the content they want.
This is not to say that centralized filters can’t be applied on top of it. We can draw on the relationship between Gmail and decentralized email protocols (SMTP, POP3, IMAP) to imagine what a strong decentralized social network might look like. Although Gmail is a centralized application, users can choose other clients or own their own domains, giving them more control over their data, privacy, and communication preferences. The cost of substitution is negligible.
Most DeSoc protocols have a similar architecture. Therefore, users truly own their own social graph and can exit any application freely.
Composability brings innovation
Open access to decentralized social protocols is likely to lead to faster and more significant innovation among applications based on them. This is consistent with the previous point - if user exit costs are low, apps must compete to provide the best user experience.
In fact, Twitter had a similar cycle of innovation when its API was relatively open. Many of Twitter’s inventions originated from outside developers. Twitterrific coined the Twitter bluebird logo and the word “tweet”; another third-party client, Tweetie, created the pull-to-refresh gesture; and the widely used TweetDeck started out as a third-party platform for managing multiple accounts and posting content. Similarly, Facebook had a significant cycle of innovation when it opened up access, allowing applications such as Zynga, Buzzfeed, Pinterest, and others to leverage Facebook’s social graph and information stream for distribution.
But when user growth approaches saturation, Web2 platforms tend to shift from collaboration to competition with their partners. Over time, entrepreneurs learn not to build on centralized platforms, limiting innovation.
In contrast, decentralized social networks assure users that access remains open and permissionless. With this assurance, they are more likely to attract smart founders and build a strong, positive-sum ecosystem.
Native Crypto Primitives
Crypto and DeSoc protocols are often (but not necessarily) related to each other due to their emphasis on decentralization. For example, profiles in social graph protocols CyberConnect and Lens are stored on the L1 blockchain, while Farcaster ID is issued on Ethereum.
This connection to native digital ownership creates a large design space, which is very different from existing social media platforms. Crypto can be used as a simple financial primitive to transfer value within the network. For example, Nostr integrated the Lightning network to enable low-cost Bitcoin tipping.
Crypto primitives can also enhance the quality of interactions. Spam and bots plague all social media platforms, but since most Crypto operations carry financial weight (even in the form of insignificant gas fees), the history of Crypto addresses can serve as an effective filtering mechanism. Some early experiments include building higher-quality feeds or address-based NFT collection portal communities.
Challenges and open questions in DeSoc Causal Difficulty Problem
The most obvious challenge facing any platform/network founder is stimulating the initial network effect. The value of a network increases as the number of people using it increases. Therefore, it is suggested that the value of the new network is small. For early users, attracting and retaining them is often the biggest hurdle due to the small value. Even after acquiring a niche community, scaling it to the mainstream market is very challenging.
This is particularly true today. In contrast to Twitter, which gained widespread popularity with little competition, today’s social media platforms must compete with existing platforms that have strong barriers to entry and a lot of capital. Since users have already built their social networks and status on existing platforms, it is not very feasible to rebuild social capital on an entirely new platform.
BitClout attempted to solve this problem by crawling and importing existing social graphs from Twitter into its platform. At launch, BitClout was pre-loaded with profiles of thousands of well-known Twitter users, including Elon Musk, Katy Perry, and Barack Obama. While this campaign served as an effective marketing strategy, the app lacked differentiation and an organic community, and failed to keep users engaged, leading to rapid user churn.
Still, like the recent rise of relatively new TikTok, starting from scratch is surmountable. Therefore, finding a real use case that truly provides utility and a differentiated experience will be key. Additionally, some DeSoc protocols may not aim to gain the largest market share, but instead choose to focus on serving audiences that value open source, control, or privacy over universal adoption, as Linux did.
Infrastructure and UX differences
Most DeSoc protocols use public and private keys to give users ownership. Examples include: Nostr, Farcaster, Lens, and CyberConnect. However, at least for now, setting up private keys is often more confusing than traditional login methods.
There are also challenges with using private keys. What happens if a user loses their private key? Some protocols, like Farcaster, have recovery processes, but they are complex. Other protocols, like Damus, have no recovery options. Without proper design to mitigate the impact of a private key compromise, users may need to completely rebuild their social graph. Self-custody will be a double-edged sword.
Other obstacles include the need for private key signatures and transaction fees for on-chain operations, which are significant downgrades in user experience compared to Web2 platforms. One can easily feel the difference between the easy onboarding experience of using something like TikTok and the stress of using any of the DeSoc apps we’ll cover below.
Over time, these issues will be resolved. Multi-party computation (MPC) and smart contract wallets can help set up social recovery and reduce gas costs. But for now, wallets, custody, and recovery are key barriers to user adoption.
Monetization - an open question
Since almost all existing social media platforms monetize through advertising spending, generating revenue through other means remains an open question.
The DeSoc protocol is experimenting with using minting fees (paying a one-time fee for a unique ID), subscription models (such as paying for unique usernames or permissioned relays), and commission models (taking a percentage of funds as they circulate on the platform) to generate revenue. While these business models make sense in theory, there is little evidence to date that they are practical at scale, with users preferring to get it for free.
Other open questions:
· Wen token? Does the DeSoc protocol need a token for decentralized governance (such as ENS, Uniswap), or can it remain decentralized without a token like Linux, Android?
Should the developers of the DeSoc protocol see the protocol’s equity/token class rise? If they do, will this create bad incentives? If they don’t, how can developers be fully incentivized and given enough resources to build and scale a platform that can compete with existing Web2 platforms?
Accordingly, how should developers think about raising capital? Some try to maximize credible neutrality by rejecting outside capital. Others believe that without enough huge funds, they cannot fully compete with the dominant players in Web2.
Industry map and where we are in the adoption cycle
Occasionally, a decentralized social app will suddenly see a large number of user signups due to external controversy or hype. The Mastodon social network grew nearly 5x after Elon Musk fired thousands of employees, changed verification policies, and arbitrarily added/removed accounts. More recently, Damus suddenly gained a large number of Chinese users, making it a top 21 social app in China.
But users tend to churn and return to existing platforms very quickly. (To be fair, Damus was ordered to be removed from app stores by the Cyberspace Administration of China.)
Short hype cycle
Overall, the DeSoc protocol and applications can still be said to be in the innovator phase of the adoption curve.
On all metrics, DeSoc adoption is orders of magnitude lower than existing platforms. Total active users on Mastodon and Damus (two relatively popular DeSoc platforms) are still just a fraction of Twitter's monthly active users (MAU). No DeSoc network is a clear winner - teams are still experimenting with the right architecture to provide a good user experience while remaining decentralized.
We focus on several of the more interesting projects below. We focus primarily on the high-level design of the protocols, weigh their strengths and challenges, and provide some commentary based on our analysis. We will not delve into the technical implementation of each protocol within the scope of this report.
Mastodon — Entering the Fediverse
Mastodon has emerged as a Twitter alternative, especially in the wake of Twitter's recent controversies.
Mastodon is built on instances on a network of independently hosted servers. Each instance is managed by its own administrators, who set the rules and policies for their specific community. Administrators can ban, censor, or encourage content based on their preferences, although many of the servers we visited strive for neutrality. As a result, Mastodon encourages users to choose the instance that best matches their values and preferences or to host their own.
Mastodon uses ActivityPub, a standardized open source protocol for social networks. It is part of the Fediverse, or federated universe, a term used for all platforms that can communicate with each other using the ActivityPub protocol.
Mastodon's development is crowdfunded through Patreon and OpenCollective, with no VC involvement.
Advantage:
All the benefits of the DeSoc platform - open source, the ability to own and control your data and social graph, and the freedom to exit from one client to another.
· Use ActivityPub, an open and decentralized protocol for social networks that significantly improves interoperability and decentralization.
Emphasis on community: Many users appreciate the community-driven nature of Mastodon, where smaller instances foster a more intimate and supportive environment.
challenge:
Instances are mostly run by individuals or groups with fewer resources than Web2 leaders. Most servers are managed by volunteers who take on the responsibility of running their own instances. This includes maintenance costs (e.g. licenses, hardware, electricity) and content management risks (e.g. bad/unwanted content, copyright infringement, extremist content, etc.). Servers can be buggy and search functionality is weak relative to Web2 platforms. Inconsistent management between different servers can lead to a frustrating experience.
Whereas Twitter is a big stew of interests, topics, and languages, Mastodon’s server architecture tends to verticalize topics. This can lead to a fragmented user base, fewer use cases, and less opportunity for serendipitous discovery.
Difficulty getting started: Twitter is already intimidating for new users. Mastodon makes the onboarding process even more complicated, requiring users to find and follow users on different servers, which may increase the burden on users.
Other points:
Mastodon does not directly integrate features or technologies from Crypto/Blockchain. Any such integration will be a third-party development built on top of Mastodon.
Different monetization methods: Some servers are run entirely by volunteers and ask for donations to maintain the server, while others run ads.
Our take
Mastodon's philosophy and design goals are admirable. It gives users the choice to create, curate, and choose their own social networking experience. Because of its open source and community-driven development, it will likely become an important part of decentralized social media for a long time.
However, several obstacles may prevent it from reaching the mainstream. Fragmenting the user base through server fragmentation would reduce its ability to achieve network effects and wider adoption. For example, while breaking news tends to spread first on Twitter, it is rare to see something similar happen on Mastodon. In addition, the current user experience is poor, which may explain the low user retention rate after the influx of new users from Twitter events.
Nonetheless, Mastodon is a strong alternative for users seeking close-knit communities with shared interests. In the future, developers will likely continue to build on Mastodon, creating third-party applications with seamless navigation and improved user experience.
Farcaster — A sufficiently decentralized protocol
Farcaster is a sufficiently decentralized social network built on Ethereum. The Farcaster team coined the term "sufficiently decentralized" to mean that even if the entire network wanted to prevent two users from finding and communicating with each other, they could still find and communicate with each other.
Although Farcaster leverages Ethereum for part of its technology stack, it does not host the entire social network on the blockchain. Instead, Farcaster IDs are registered on Ethereum, while its social graph and content are hosted on a network of nodes called Hubs. These Hubs ensure the consistency of the network as they replicate all data and signed messages. The Farcaster protocol also prunes messages, making Hubs lightweight and increasing the decentralization of the protocol.
Farcaster Architecture
Farcaster drives competition at the application and client level. The team believes that great applications should evolve from this architecture. Since user distribution happens at the protocol level, applications with killer features should theoretically be able to leverage the underlying distribution of the protocol to gain market share. This is like Clubhouse leveraging the social graph of Twitter/Instagram users at launch.
Farcaster is currently invitation-only and has a total user base of about 11,000. The Farcaster protocol was developed by Merkle Manufactory, which raised $30 million in a round led by a16z last summer. Merkle Manufactory is also building a mobile/desktop client called Warpcast on top of Farcaster.
Advantage:
· The protocol and first client applications are developed by Merkle, allowing new features to be tested and released at similar speeds to Web2 competitors. Warpcast has made significant improvements over the past few months, including the launch of a desktop client, QR login, mobile apps in the App Store, and more.
· Even in its early stages, the Warpcast onboarding experience feels very familiar to Twitter users.
Thoughtful design of trusted ID and account recovery
--ID: While the primary namespace is completely decentralized, secondary namespaces can be managed. So if you register on Farcaster, no one can take your unique ID from you (e.g. @918392), but if you falsely register the handle @jeffbezos, the secondary namespace could choose to take it away.
--Recovery: Built-in recovery system in case of private key loss/attack, with a 7-day time window to prevent malicious account takeover.
· Since Farcaster’s ID exists on Ethereum L1, it is easier to integrate other Crypto elements in the client. For example, Warpcast incorporates NFT authentication and discoverability into its client.
Discover NFTs on Warpcast
challenge:
Merkle must demonstrate credible neutrality over time, as the protocol and de facto clients to date have been developed by centralized teams. VC support may hinder claims of credible neutrality.
Accordingly, since Merkle has a first-mover advantage and is the first to learn about new protocol developments, its default client may crowd out third-party clients.
Other points:
· The way to make money could be through paying for unique Farcaster names (e.g. @elonmusk), although this has not yet been implemented or confirmed.
GTM seems to be curating a Western-oriented tech community, including people working on Web2, Web3, VC, etc.
Our take:
Farcaster's current more centralized structure enables it to better respond to user feedback, iterate quickly, and achieve product-market fit. Its architecture is well designed and should scale easily to accommodate millions of users. In addition, Merkle's VC support provides Farcaster with financial and network resources for growth.
We are optimistic that the team will be able to expand the user base beyond the current user base. The initial market strategy of targeting technology enthusiasts is smart, as these users are often early adopters of new platforms and are more likely to contribute to open source protocols. There is already a vibrant developer community with various applications leveraging Farcaster's social graph. Similar to the dynamics that Instagram and Vine created for Twitter feeds a decade ago, it can also play out similarly in Farcaster's ecosystem.
We are primarily interested in how Farcaster decentralizes over time. This can only be solved with time as the Farcaster team shows they can slowly let go, making it easier for developers to run Hubs, and allowing third-party developers to compete with Warpcast on an equal playing field.
Lens — Own your digital roots
Lens Protocol, developed by the Aave team, is a smart contract social networking platform based on Polygon. Almost all important social interactions are recorded on-chain. Users' profiles and followers are represented by NFTs. Mirroring and collections (similar to retweets and favorites) are also on-chain operations that create NFTs. The content itself is stored off-chain to save gas costs and only becomes an NFT when it is collected. The platform is designed to be modular, allowing developers to create new features through modules.
Similar to Farcaster, Lens aims to be a neutral base layer and encourage competition at the application/client level.
Lens received external capital from FTX Ventures last year.
Advantage:
Lens offers unique and innovative features through Crypto technology. For example, the Collect module allows creators to sell their posts directly to followers. Artists can create "rare collectibles" that allow followers to collect their artwork for a limited time. Followers can also mirror these posts and earn referral fees. Since all these operations happen on the blockchain, balances are debited and credited instantly, without a middleman.
Unlike Farcaster, Lens can “hitch a ride” on other nodes that have already validated the Polygon blockchain. Therefore, Lens is as decentralized and permissionless as the Polygon network itself.
Modular architecture allows others to create new social infrastructure.
Examples of creators using the collection module to monetize artworks
challenge:
Since many user actions are read/write operations on Polygon smart contracts, latency and throughput can become issues, especially when the blockchain is experiencing high usage or network instability.
Unclear GTM: Current users appear to be made up of Crypto natives, creators, developers, and people who are effectively airdrop farmers. As a result, the overlap of common interests may be small, which could reduce user engagement. This is supported by the relatively low DAU/MAU ratio.
Spam, mostly from Sybils and airdrop farmers, makes it difficult to parse signal and noise.
· Reportedly, posts are unlikely to gain traction unless one of the Lens team members mirrors/reshares the post.
Other points:
· Use third-party protocols XMTP to build security for direct messaging, Crypto channels, and Lit protocol to create gated publications.
Our take:
Lens is one of the most innovative and exciting DeSoc protocols. It offers features and tools not seen on Web2 or other Web3 platforms, demonstrating what Crypto-enabled social networks can unlock for creators and fans. Ideally, these features will kickstart a powerful flywheel where creators start using Lens to build more direct relationships with their fans, attracting users to the platform, attracting more creators, etc. We also like Lens' modular architecture, creating a broad design space for new social fundamentals.
Admittedly, the platform still has room for improvement. Popular apps built on Lens lack a refined user experience, and we have some concerns about Lens’ scalability given its current architecture. But these issues can be addressed over time. We look forward to seeing the apps that third-party developers build on Lens.
CyberConnect - a scalable and context-rich social graph
On the surface, CyberConnect is very similar to Lens Protocol. Both are decentralized social networks that utilize smart contracts on generalized blockchains. Like Lens, CyberConnect issues NFTs for profiles, followers, and content. Creators can monetize through NFTs or token-gated portions of their communities. Likewise, both are built with modular architectures that allow developers to develop and reuse modules based on their needs.
However, CyberConnect uses a combination of multiple blockchains and distributed networks, including Ethereum, Polygon, BNB Chain, IPFS, and Arweave. CyberConnect also caches and batches user actions before uploading them to decentralized storage like Arweave to improve scalability while maintaining data integrity and censorship resistance.
CyberConnect sets itself apart through its initial and diverse use cases and social graph curation. The first use case for other protocols like Farcaster and Lens is often “decentralized Twitter”. In contrast, CyberConnect offers a variety of other products and features:
ccProfile: On-chain identity standard for individuals/groups, including on-chain operations.
Link3: Similar to Linktree and Eventbrite, Link3 helps Web3 users find other profiles and discover/attend events, leveraging the social graph of ccProfiles and CyberConnect.
W3ST (Web3 State Token): A more general concept of proof of attendance, covering endorsements, roles, certificates, and participation.
FanClub: A loyalty and community game that recognizes and rewards users for their contributions to companies and DAOs, similar to Galxe and Crew3.
Posts: A publishing tool similar to Mirror.xyz (a decentralized Substack) that stores content permanently on-chain and allows followers to collect posts.
CyberConnect also has a thriving ecosystem of dApps covering a variety of use cases beyond Twitter’s functionality. Its recent hackathon “#Connected2023” particularly strengthened its ecosystem.
Select a project in the CyberConnect ecosystem
CyberConnect received $15 million in Series A funding in May 2022, co-led by Animoca Brands and Sky9 Capital [Disclaimer: Amber Group also participated in CyberConnect’s Series A].
Advantage:
No need to sign minimal private keys, seamless user experience.
Multi-chain support and proprietary data indexers enhance scalability, flexibility, and social graph connectivity. Based on our conversations with other developers, this also improves the developer experience.
The social graph may be richer, including individuals, groups, activities, and various on-chain interactions.
Various products for Web2 users: Link3 <> LinkTree, Posts <> Substack, Events <> Eventbrite, Phaver <> Twitter, Huddle01 <> Zoom, etc.
Modular architecture allows others to create new social primitives.
challenge:
CyberConnect uses centralized relayers to improve scalability. Although no plans have been announced yet, it may be decentralized in the future.
Some of Cyberconnect’s early features (e.g. Events, Status Tokens, FanClub) are lower engagement products.
Similar to Lens, it is difficult to parse the signal from the noise due to mostly junk activity like Sybil and airdrop mining.
Other points:
· Since the initial GTM was for use cases like Events and FanClubs, among others beyond Twitter, the average quality of CyberConnect’s social graph is different than Farcaster or Lens.
By leveraging more use cases, not just for the Crypto-native community, CyberConnect is also expected to attract more mass users to Web3.
· Powerful B2B onboarding for use with many Web3 organizations, with numerous Link3 profiles.
· 278E and 401BNB (about $603,000) from profile minting fees since February this year.
Our take
CyberConnect has done an excellent job of building a radically different social graph and providing the broad range of applications commonly found in Web2. Its initial GTM targets Crypto-native and Crypto-adjacent communities, helping to strengthen immediate adoption. It has the potential to become the decentralized social media and content one-stop shopping center for the Crypto industry, replacing Linktree, Medium, Eventbrite, and other Web2 tools that Crypto users/companies use today.
However, the effectiveness of all the experiments with different use cases remains to be seen. If decentralized social platforms are to gain strong adoption and high engagement, there needs to be a killer feature that drives growth.
Despite this, the CyberConnect team continues to deliver sleek and innovative products. We look forward to seeing what new things the team and other developers will build on top of the protocol.
Conclusion
Decentralized social protocols and platforms face a daunting challenge in their pursuit of mainstream adoption. For every success of a founder, there are thousands of similar failed attempts.
However, we remain hopeful. Decentralized social networks have a unique opportunity to introduce entirely new social primitives and return the value of the social graph to users.
Social media is on the brink of transformation. While we are still in the early stages, the possibilities are truly endless in terms of reinventing how we connect, share, and interact online, opening the door to a brighter, more inclusive, and more empowering digital landscape.
