Forward the Original Title‘Web3 Social迷思：没弄清社交与社区的不同，还有灾难性的X to Earn模式’

The Web3 industry has emerged from the sluggish bear market in the past year. Although it is far from a real bull market, there are more and more voices about the upcoming Social Summer. In particular, the recent arrest of Telegram founder Pavel Durov at a French airport on charges of fraud, money laundering, terrorism and other crimes has further aroused attention to social products.

This is understandable. The crypto-native technical route appears to have reached its limits (with the necessary infrastructure now in place), yet mass adoption remains elusive. The social track, in theory, offers the easiest path to engaging a vast user base and potentially establishing an ecosystem. Consequently, it bears the weight of the stagnant Web3 industry’s anxieties. Any sign of success from social applications like friend.tech or Farcaster immediately captures the entire industry’s attention.

Although I am also optimistic about the social track, I have to make a harsh voice-The entire Web3 industry is full of assumptions as laymen about the social track, and the depth of misunderstanding is actually no less than that of collectibles, RWA and DePIN.

We must first understand Social well enough before we can talk about how to combine it with Web3 to become Web3 Social (or DeSo).

1. Social and community

Whether it is Web3 Social, DeSo, or SocialFi, the concept is to provide services to real users in the end, so we must distinguish whether these services are for social or community. Most of the time, people seem to confuse the two, especially in the Chinese context, where they have almost become synonyms, but in fact social and community are two different things.

1.1. Social: Starting with communication

In a broad sense, social products start from social interaction (social, in fact, more accurately, social interaction), while social interaction starts from communication.

Social interaction is a micro-level communication behavior, which may occur between two people or a group of many individuals. The way to achieve social behavior is communication, so social products must start with communication software.

Email is the earliest communication tool, which was first implemented by MIT in 1965. In 1973, the University of Illinois developed the first online chat system Talkomatic on the PLATO system. The other party can even see what letters you are typing in real time. Since then, various communication software has been continuously iterated. Today, we use online chat applications such as WhatsApp, WeChat, Telegram and various mailboxes for daily communication. The most core communication functions were already available at that time.

So why do users keep changing communication software? In fact, behind every communication software that becomes popular, there is a reason that drives users to use it. In summary, there are only three reasons: either it is free, you can find the right person, or it is censorship-resistant.

Tencent is a successful case driven by free services. In 1999, when the three major operators had not yet launched SMS services, OICQ (later QQ) bypassed the telephone network and could send messages directly for free. However, sending and receiving messages on a computer was more troublesome, which gave the three major operators, who launched SMS services in 2000, an opportunity, charging 0.1 yuan per SMS, which in turn laid the groundwork for the rise of WeChat in the era of the popularization of smartphones.

But why did the opportunity go to WeChat instead of the more mature QQ? First of all, it was because mobile QQ only transplanted the old PC products to the mobile terminal in the early days of mobile Internet, and the product experience was not as good as WeChat, which was originally built for mobile terminals. More importantly, WeChat took the lead in launching voice messages, voice calls, video calls and other functions, completely replacing the SMS and call services of mobile phones.

In other words, if we follow the logic of free services, the next communication software driven by free services should be free satellite calls and satellite Internet access.

The success cases driven by finding the right people are all kinds of dating apps, such as Momo for strangers to make friends, Blued for sexual minorities, and Qingtengzhilian for high-educated people to meet… The success stories driven by anti-censorship are Telegram, Signal, etc.

Clubhouse combines the characteristics of finding the right people and anti-censorship, which makes this very common voice chat software hard to find when it first appears, because there are powerful people here, and you can also talk about very exciting topics.

In short, social interaction is the most basic social behavior, and the most basic function of social interaction is communication. Even if the social products are complex, the core function is to start from communication, and then continuously integrate new services to evolve into community products.

1.2. Community: Social Media and Social Networks

The complex organism formed by the social behaviors between many people and groups is considered a community.

Note that a community is not a simple collection (many people understand the community as “pull a group and then someone chats every day and that’s it”…), but all members support each other out of common demands (such as interests, visions, etc.), which means that members have to pay a certain amount of information, resources, etc. When the resources demanded by members within the community are higher than the resources produced, the community will decline. Just like cancer cells, they will only continue to replicate and consume the body’s energy until the donor dies.

Therefore, building community products is significantly more challenging than creating social products. It’s akin to establishing a religion. While capitalizing on a specific communication need (like free voice chat in the past) can lead to temporary popularity, the subsequent performance of most social products has demonstrated that retaining users is far more difficult than attracting them initially.

Based on the different ways in which community products retain users, they can be divided into two categories of products: content-centric and relationship-centric, namely social media and social networking services (SNS). These two terms can easily confuse the concepts of social and community.

Content-focus social media can be traced back to Notes, which was also born in the PLATO system in 1973 (the first online chat system Talkomatic was also born here in the same year). Notes already had the prototype of BBS, and various community products such as forums, post bars, blogs, etc. that followed were all developed from this. They are all centered on interests, so they will continue to accumulate user-generated content (UGC), and finally evolved into Twitter, Weibo, Instagram, Xiaohongshu, etc., which we are familiar with today, in the wave of mobile Internet.

Social network services centered on relationships are actually the “communication products driven by finding the right people” mentioned above, but only when the product is really used as a communication list, it can be considered a real social network. For example, WeChat is for offline acquaintances to socialize, Momo is for strangers to make friends, LinkedIn is for workplace friends…

1.3. From a single function to a comprehensive platform

However, even if we have sorted out here and strictly distinguished between social and community, the definition of social products may still be confusing, because today’s social products often no longer have only a single function, but integrate functions of different levels and dimensions.

This is the root cause of all the confusion about social products - only focusing on the most superficial functions of the product to play puzzles, but unable to restore the real driving force and evolution of the product.

Let’s take WeChat as an example. First, through the communication functions of free text messages and voice messages, the user’s real interpersonal network was quickly migrated, and a huge social network of acquaintances was precipitated. Then, the stranger social market was opened up with functions such as “People Nearby” and “Shake”, and the number of users quickly exceeded 100 million.

Later, voice calls and video calls were supported to strengthen the advantages in communication, and functions such as “Friends Circle”, “Official Account” and “Video Account” were launched one after another. It developed into social media based on social networks, and the addition of payment functions caught Alipay off guard.

This method can also be used to analyze X, Facebook, Telegram and even Douyin, but almost all analysis reports on Web3 Social today are like a user who has only used WeChat for the past two years to analyze WeChat - it is natural to mix various functions together for analysis, which naturally makes it difficult to grasp the key points of the product. Entrepreneurs guided by this idea are nothing more than replicating another WeChat, starting with large and comprehensive functions, but not thinking about how to obtain and accumulate the real users behind those functions.

Therefore, this article can also be expanded according to different communication methods, content types, social relationship types and media types, make a beautiful table, and then use Internet jargon to seriously analyze those randomly combined results (such as “an encrypted app that supports voice calls and live broadcasts for communication between Web3 practitioners and can carry single transactions”), so as to make the research very professional, but in fact it does not have any practical guidance value.

2. Web3 Social Landscape

After so much preparation about social, we are finally going to talk about Web3! What Web3 Social needs to consider is much more complicated than the various Internet social products mentioned above, because the entire Internet protocol is fundamentally different from the blockchain protocol.

2.1. Model level: Internet and blockchain

The Internet can be divided into 7 layers according to the OSI model, and developers only need to consider the top application layer. However, the blockchain has not yet been finalized, so it is relatively complicated. Here is a layered model for reference only, and then the analysis is based on this model.

In the blockchain world, if the blockchain network is layer1, then the Internet is layer0, which plays the role of the underlying communication infrastructure. The blockchain network can also be subdivided into different layers, such as the network layer, data layer, consensus layer, and incentive layer. Although there are different layered schemes, the current mainstream scheme is to let the public chain package them together, so we can directly discuss the public chain.

Above the public chain is the protocol layer, which encapsulates various script codes, algorithms, and smart contracts. It is worth noting that they are not terminal products, but some key components that realize the minimum functions, some of which are smart contracts executed on the chain, and some are middleware executed off the chain.

Since the blockchain is a shared data layer, these smart contracts are open and can be used unlimited times, so later developers can theoretically combine and optimize them based on these smart contracts and middleware to build a new application.

The problem is that at present, both smart contracts and middleware are still very lacking at the protocol layer (the few innovations are concentrated in the DeFi field, and there are no revolutionary products in the social track), so on this basis, it is unlikely to build a product that meets Mass Adoption at the application layer.

2.2. Two logics: bottom-up and top-down

Specific to the Web3 Social track, there have always been two product paths competing - crypto natives prefer to build native encrypted social products from the bottom up, while intruders from Web2 prefer to build mature Web2 products from the top down and then gradually add Web3 modules.

2.2.1. Bottom-up solution

There are two bottom-up solutions, one is the identity management infrastructure built around accounts, and the other is the social graph built around content.

In the Web2 world, the most important account is the mailbox, while in the Web3 world, it is DID (Decentralized IDentifier), which users create and manage on the blockchain and can interact privately with other applications.

The most typical representative is ENS, a decentralized domain name system based on Ethereum, which can create and manage identities/digital identifiers for individuals, organizations, and even devices (but the earliest on-chain domain name system was Namecoin, which was forked from the Bitcoin network in 2011).

However, the problem faced by such DID projects is that there is no real application scenario that is really needed except for being used as a wallet domain name…

The social graph with content as the core allows users to put their social data on the chain, such as personal information, posts, and attention.The most typical representative is Lens Protocol, which tokenizes and NFTizes users’ social data and behaviors, and developers can build new social applications based on this. However, no truly viable social applications have yet been bred.

In addition, simple tools such as Blink are also worth paying attention to, which can convert on-chain behaviors into links that can be embedded in various websites and social media platforms.

2.2.2. Top-down solutions

As for the top-down solution, it is very simple, which is to transform mature social products into chains, but it is also divided into two specific types.

One is to first make a mature Web2 social product, and then gradually add Web3 modules. The oldest and most successful of this solution is bihu.com, which was later shut down. Although many similar projects have emerged, especially SocialFi, which was inspired by the X to Earn model in 2022, launched mechanisms such as posting mining, commenting mining, and chatting mining, but now they are basically dead. Because the model of SocialFi is naturally not established, the reasons will be explained in detail later.

Currently, in the various social products that are gradually transitioning from Web2 to Web3, the only one that performs well is Farcaster, which is very restrained and does not adopt the SocialFi model, but instead carefully cultivates the crypto community, and the functions of Web3 exist in the form of plug-ins. You must know that the crypto community naturally has a wealth effect, so it naturally gave birth to a group of memecoins represented by Degen (if listing is as simple as issuing coins, Snowball will crush all big companies).

The other method is very hidden, and it is easy to be mistaken for a crypto-native product. They often have decentralized databases, combined with modules such as DID and DAO tools, allowing anyone to build their own Web3 applications on them.

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It is confusing because all modules seem to be Web3, and they appear to be large and comprehensive in terms of functions, but if you jump out and look at it, you will find that it is actually directly re-expressing mature Web2 social products from beginning to end in a Web3 way (for example, using encrypted signatures and distributed systems), so there is no essential difference from Web2 products.

For example, Ceramic and UXLink seem to span the multi-layer blockchain technology stack from the application layer to the infrastructure layer, and cover multiple aspects from the underlying technology to the user interface. It is a very complete Web3 social ecosystem. This is like using reinforced concrete to imitate a wooden attic. It is possible but unnecessary. Obviously, new forms of buildings can be designed based on the characteristics of reinforced concrete.

2.2.3. Limitations of the two product paths

In general, whether it is the identity management infrastructure built around accounts, or the social graph built around content, or simply re-expressing mature Web2 social products from beginning to end in the way of Web3, the above ideas are more like preparations for doomsday survival players in the digital world. They are unnecessary for the general public, so they are often “respected but not understood”, and it is difficult to produce a mass product along this path.

Perhaps we should put aside our fundamentalist prejudices and re-examine the vitality of Web2.5 products such as Farcaster, which in turn returns to the ability to do social and community mentioned at the beginning of the article. In fact, the effort lies beyond technology.

3. X to Earn and its applicable scenarios

However, regarding Web2.5 products, imagination is almost monopolized by “Web3 version of XXX”, such as Web3 version of TikTok - Drakula, Web3 version of Instagram - Jam, etc., and the Web3 part is only reflected in the monetization of the business model, that is, Fi, or the more familiar X to Earn.

3.1. The essence of monetization is the points mall

Monetization seems to be the only magic weapon for Web3 to change all Internet products. Whether it is the “token faction” and “chain reform” that were popular in 2017, or the “X to Earn” that became popular in 2021, they are essentially using profit-sharing to motivate user retention.

In fact, a very mature points gameplay has been precipitated in the Internet field, using the method of “doing tasks - earning points - exchanging goods or rights in the mall” to increase the activity of App users, but it is only a means of auxiliary operation. After all, money will not appear out of thin air. If the wool cannot come from the sheep, it must be pulled from the pig. In short, in a normal business model, this kind of subsidy will have a cash flow bottleneck in the long run.

Only the capital market can break the cash flow bottleneck, directly develop a product dominated by the points gameplay, and then let the latecomers take over. Around 2015, there were many middle-aged women in third- and fourth-tier cities promoting various apps that were said to make money but required membership fees to be paid first.

However, the popularity of ICOs provides a more clever way than Ponzi schemes - Ponzi schemes have to recruit people offline before someone can take over, while ICO projects directly issue coins, and do not even need someone to take over. Existing users will even increase their positions as long as they expect the price to rise, and there is no problem of finding a specific person to defend rights in the secondary market.

So the monetization of most Web3 products is essentially the gameplay of the Internet points mall, but the points are not exchanged for goods bought with real money, but for the market value expectations in the secondary market.

3.2. Challenges of monetization solutions

Of course, we should not deny monetization in its entirety, but it has specific applicable scenarios, at least not for most social and community scenarios.

The first challenge is actually a bottleneck in management - With the current performance appraisal level, it is impossible to accurately identify the effective behavior of users, and it is impossible to give appropriate incentives in a targeted manner. The final destination can only be to attract wool parties.

Even if the rules are accurate to the number of minutes of retention per day and the completion of tasks, the wool-pulling studio will play it clearly, and real users are not as competitive as robot accounts. Almost all “X to Earn” model projects have not been able to avoid this.

And even if the project can indeed distinguish effective user behaviors and develop a reasonable incentive plan, it is not naturally suitable for social/community products because it also faces psychological challenges - monetization shifts the user’s motivation from the product itself to the incentive, so when the incentive weakens, the user’s motivation to use the product disappears.

What’s worse is that for a social product, a good social experience itself is a reward for the user, while the SocialFi model is constantly prompting users to shift their attention from pure social experience to monetary incentives, and the final result must be that users will be bored with the product itself.

3.3.The Absurdity of SocialFi

If we develop a dating app based on the SocialFi model, quantify the various things that couples do every day, such as chatting, sending flowers, kissing, hugging, etc., and finally reward them, then for couples using this app, the final dating experience will be very boring.

If you also think that this dating app is designed ridiculously, then all SocialFi projects are designed in this way. The absurdity of SocialFi can be explained by the psychological overjustification effect - monetization gives users an extra reason to do something that they already have sufficient internal reasons for, thus allowing the user’s behavior to be controlled by this external extra reason.

If you want to monetize user behavior, it is only applicable to those rigid payment scenarios, such as pornography, gambling, drugs, and fan economy. Users already have a strong willingness to pay and can provide a steady stream of cash flow. At this time, using monetization to assist operations can play a icing on the cake.

Like all the current monetization (X to Earn) projects, they look very well designed, but in fact they cannot bring long-term positive income and can only wither away in constant idling.

Conclusion

Web3 Social carries the expectations of the entire Web3 industry for Mass Adoption, but it is currently in a fog of cognition.

Myth 1:There is a widespread confusion between the concepts of social and community, so people can only focus on the most superficial functions of the product, ignoring the real driving force and evolution of the product. In the end, in terms of product design and positioning, they tend to create products with large and comprehensive functions, and are full of assumptions about the prospects of the product. In fact, users have no reason to choose it.

Myth 2: Crypto fundamentalists believe that the revolution in social products brought about by encryption technology has not actually brought about any changes in the communication level (such as from text to voice to video). It is more about micro-innovation based on existing functions (such as DID, social graph), rather than paradigm shift. And this kind of micro-innovation in functions is more suitable for doomsday survival players in the digital world, rather than the general public.

Myth 3: Intruders from Web2 think that with their excellent Web2 products, as long as they carry out monetization transformation in the mechanism, they will attract a large number of users to come in and become loyal fans. In fact, they can only attract wool parties. Because monetizing user behavior will shift users’ attention from social experience to monetary incentives, and monetary incentives are still limited (after all, there is no continuous cash flow), so in the long run, the product will continue to run in vain. The monetization plan can only be used as an auxiliary operation means to stimulate users’ strong willingness to pay, rather than allowing users to generate a willingness to pay out of thin air.

Therefore, Web3 cannot start from scratch to create a social product suitable for the general public, whether in terms of technology or business model. But it does not mean that Web3 social networking has no future. After eliminating various myths, there seem to be only two paths that can be established.

Either, like Farcaster and Telegram, first carefully cultivate a crypto community product, and then support some Web3 functions in the form of plug-ins, and the crypto community will naturally give rise to various wealth effects.

Alternatively, projects like ENS and Lens Protocol can continue developing innovative middleware at the protocol layer. While these may seem of limited use currently, they serve as valuable technical reserves. In the future, they could be integrated into major Web2 social applications as plugins, potentially introducing new interaction models. This approach might also spawn novel application scenarios, such as the new credit assessment mechanisms emerging from ENS.

This article initially plans to explore the potential of Web3 Social. However, upon reflection, it appears more crucial to identify what to avoid. Nevertheless, in the near to medium future, focusing on developing a crypto community seems to be the most promising direction.

Disclaimer：

1. This article is reprinted from [JDI Labs]. Forward the Original Title‘Web3 Social迷思：没弄清社交与社区的不同，还有灾难性的X to Earn模式’. All copyrights belong to the original author [JDI Labs]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.