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

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

A few months ago, the popularity of friend.tech reignited interest in Web3 social, attracting attention and FOMO by assigning prices to the influence of KOLs. The subsequent emergence of Bodhi also garnered significant attention by assigning prices to content, achieving a return of data value. In the realm of social networks, Web3 social seems to be undergoing new transformations and explorations. With the development of blockchain technology, it is redefining our perception of social interactions and offering a range of innovative solutions. Whether it’s SocialFi or decentralized social (Desoc), Web3 social is actively exploring the possibilities of future social networks.

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

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

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

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

Observing from different historical stages, technology has significantly influenced the development and evolution of social media, acting as a crucial driver of transformation.

Ancient and Traditional Media Period: In ancient times, letters and postal services were the primary social media. With the invention of the printing press, books and newspapers became the main tools for information dissemination, but the scope of social interaction was limited by geography and communication speed.
Telegraph and Telephone Era: From the late 19th century to the early 20th century, the advent of the telegraph shortened the time for information dissemination, and the popularity of the telephone changed the way people communicated over long distances, allowing for quicker information exchange.
Radio and Television Era: The 20th century saw radio and television media change the way mass communication occurred, enabling information to be disseminated more widely and shaping cultural, political, and social concepts.
Internet and Web1.0 Era: From the 1990s to the early 2000s, the emergence of the internet made information dissemination more widespread and instantaneous. The Web1.0 era was primarily composed of static web pages, with content mainly being a one-way transmission from official sources to users, limiting user participation in content creation and social interaction.
Web2.0 and the Rise of Social Media: From the mid-2000s to the present, the rise of Web2.0 has led to the emergence of more interactive and user-participatory social media platforms, such as Facebook, X, and YouTube. These platforms provide more user-generated content and social functions, becoming the primary tools for daily communication, sharing, and interaction.
Web3.0 and Decentralized Social: Recently, with the development of blockchain and cryptocurrency technologies, social platforms that emphasize decentralization, privacy protection, and user control have emerged. These platforms aim to address the issues present in Web2.0 social, such as data privacy, algorithmic filtering, and information authenticity, providing a more secure and transparent social experience.

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

Maintaining connection and a sense of belonging: Social interaction makes people feel a sense of belonging, fulfilling emotional and psychological needs, establishing close relationships, and gaining support.
Information learning and exchange: Through social interaction, people can share experiences, knowledge, and information, promoting learning, development, and personal growth.
Cooperation and mutual assistance: Social interaction helps people collaborate and work together to solve problems and achieve common goals.
Social identity and self-expression: Social interaction is a way for people to showcase themselves, establish identity recognition, and gain acknowledgment.

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

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

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

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

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

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

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

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

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

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

Weak Censorship Resistance: Since Web2 information is stored on centralized servers, it is subject to political, cultural, and other influences, leading to a lack of freedom of expression in many countries' apps, effectively depriving users of their rights to express freely. Whether it’s the frequent changes in X's rules, account bans, or the restrictions imposed by Facebook, TikTok, and WeChat, centralized platforms impose too many limitations, forcing users to dance under constraints.

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

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

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

As the entire Web3 social sector is still in the value validation stage, this research chooses to analyze Web3 social projects from different demand points, aiming to comprehensively dissect the current development status of various projects.

Data Value Return to Users#

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

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

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

Lens Protocol#

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

As a representative protocol in the Web3 social sector, Lens has over 200 applications built on it, with a total ecosystem user count reaching 370,000. The number of monthly active users peaked at over 60,000 in March this year, currently maintaining around 3,000 monthly active users.

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(Source: Dune)

Lens Protocol has three main characteristics:

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

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

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

friend.tech#

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

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(Source: Dune)

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

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

In simple terms, friend.tech realizes the monetization of KOL influence value; the more reputable the KOL, the more users will buy their shares, increasing their value and selling price.

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

Innovative Model: The method of purchasing KOL keys with tokens to realize the fan economy is quite innovative. Although the economic model still resembles a Ponzi scheme, KOLs invite people to join, fans purchase, and KOLs invite again, creating a smooth positive cycle. KOLs and fans become a community of shared interests, forming a necessary factor for momentum.
Capital Boost: friend.tech announced a $50 million seed round financing from Paradigm on August 19, and trading volume quadrupled the day after the announcement, leveraging the backing of top VCs to boost market enthusiasm.
PWA: friend.tech did not adopt a mobile app approach but used PWA (Progressive Web App). This allows users to experience an app-like interface through mobile device web browsers, effectively avoiding the need for users to download apps from the App Store or Google Play and the associated fees, making it a viable strategy for less complex applications.

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

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

Bodhi#

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

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(Source: Dune)

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(Source: Bodhi Top Assets)

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

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

If content is stored on-chain, access permissions must be set through payment, requiring encryption and decryption. However, most decryption processes still occur on centralized servers, making it essentially no different from being directly hosted on centralized servers. If decryption is done through blockchain mechanisms, it remains public.

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

Summary of Current Situation Analysis#

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

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

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

Censorship Resistance#

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

Farcaster#

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

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(Source: Dune)

Overall, Farcaster's two main characteristics are:

Decentralized Identity: Farcaster stores users' identity information on-chain to ensure decentralized identity. Similar to Lens, data is bound to users' identities, making migration costs low when users use various applications within the Farcaster ecosystem.
On-chain and Off-chain Integration to Enhance User Experience: In addition to identity information, Farcaster stores high-frequency data such as user-generated content and interactions off-chain in the Farcaster Hub, enabling fast data transmission and better user experience. This somewhat sacrifices part of decentralization for improved user experience.

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

Nostr#

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

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

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

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

While Nostr and Damus have recently seen some decline, every time Musk engages in bans or censorship on X, some Web3 advocates return to the embrace of censorship-resistant social platforms. The explosive popularity of Damus has also made Nostr developers aware that the demand for censorship resistance is always on users' minds.

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

Summary of Current Situation Analysis#

In traditional Web2 social platforms, centralized management often leads to content censorship and speech restrictions. Platforms like X frequently ban accounts and censor content, raising awareness of the importance of censorship resistance. Before Web3, products like Longmaoxiang aimed to break censorship limitations. With the development of blockchain technology, more Web3 projects are beginning to aspire to create censorship-resistant social projects and protocols akin to X and Facebook.

Both Farcaster and Nostr are noteworthy attempts. Although neither has yet spawned continuously active applications, Farcaster's user engagement metrics, such as high posting and interaction counts, indicate user stickiness. However, its subscription model may deter some users, particularly those accustomed to free products in Web2. After the explosive popularity of Damus, user retention has not been substantial.

However, the explosive popularity of Damus and the overwhelming presence of posts in social circles demonstrate people's innate curiosity and yearning for a Web3 censorship-resistant social product. The exploration and attempts of these projects in censorship resistance bring new possibilities to Web3 social and provide more experience and hope for the emergence of the next killer application.

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

DeBox#

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

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

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

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

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

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

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

The Trade-off Between Decentralization and User Experience#

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

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

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

Putting everything on-chain can lead to cost and speed pressures, while partial on-chain implementations may raise questions about "Web2.5" social experiences. Current Web3 projects are still in the exploration stage of continuously splitting and reorganizing on-chain components. There is still a long way to go in balancing user experience with actual user needs.

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

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

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

Sustainability of Data Value Return to Users#

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

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

According to Messari's data, in Q3 2023, the financing data for social projects was around $10 million, significantly lower than the $200 million for DeFi projects and $150 million for gaming projects. In terms of the number of financing projects, there were 6 social projects, fewer than the 67 DeFi projects and 25 gaming projects. One important reason behind this is the low overlap between the target users of social products and the user profiles of Web3.

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

Compared to social user profiles, many players who love gaming also possess traits like gambling and competitiveness. Therefore, Gamefi and gaming projects can more effectively convert users attracted from various Web3 platforms into gaming users. Similarly, DeFi projects can easily attract users with investment and speculation needs, perfectly matching user profiles. The recent explosive popularity of BRC20 inscriptions is also closely related to its significant wealth effect. The demand differences between social users and Web3 users are inherently larger than those between gaming and finance, which may also explain why the social sector appears quieter compared to gaming and DeFi.

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

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

Early Web1.0 Stage (Late 1990s to Early 2000s): Social products in this stage primarily existed in the form of forums and chat rooms. The business model was mainly based on advertising and membership fees. Some forums earned income through ad displays, while chat rooms charged membership fees. For example, AOL (America Online) charged membership fees for users to access its services, while Yahoo Groups generated revenue through ad displays.
Web2.0 Social Product Stage (Mid-2000s to 2010s): With the development of internet technology, social media and networking platforms gradually emerged. The business model in this stage primarily revolved around ad displays and user data collection. Social media platforms generated revenue through ad displays and targeted placements, while user data became a valuable asset used for personalized advertising and marketing, as seen with Facebook, X, and TikTok.
The Rise of Web3 (Late 2010s): The arrival of Web3 brought the application of blockchain technology and decentralized thinking. Social products began to explore new business models, such as data value return, token economies, and NFTized data assets. Users gained more control over their data and could receive rewards through participation in governance and data sharing. For instance, Lens NFTizes data assets, while friend.tech and Bodhi assign prices to influence/content to return data value to users, and Farcaster still adopts traditional membership subscription models.

Additionally, due to the regional market environment differences for social products, many factors need to be considered when Web3 social products enter the market. For example, a significant aspect of returning data value to users involves addressing creator economy issues.

Currently, the main income model for creators remains primarily B2B, with some B2C. Due to the low incentives for content views and clicks provided by many domestic and international platforms, most creators have to accumulate substantial traffic resources to earn money from the B2B side through advertising. Some creators have begun to experiment with B2C methods like product sales, but both income models can negatively impact the creators' brand and reputation. Therefore, many Web3 social projects aim to start from the B2C model, allowing creators to receive appropriate returns directly from high-quality content, which is also the approach of friend.tech and Bodhi (through influence and content incentives).

The difference is that in the domestic market, the traffic of social and creator platforms is highly monopolized, with WeChat, Douyin, and Kuaishou dominating the majority. The platforms are extremely powerful, and creators have low bargaining power, leading to meager revenue shares. Creators find it challenging to rely on platform traffic incentives for their livelihoods, forcing them to choose B2B models for commercial income, including ad placements and live sales. However, due to the platforms' dominance, it is difficult to direct traffic to private domains. Therefore, domestic creators tend to study platform recommendation strategies—creating content types that can boost traffic—gaining traction, and then monetizing commercially.
In contrast, the monopolistic situation of social platforms in overseas markets is somewhat better, with relatively higher fluidity of traffic between public and private domains (the concept of private domains emerged due to the dominance of public domains in the domestic market). Therefore, creators on overseas social media platforms like Instagram and YouTube can direct traffic to their independent sites or webpages after gaining followers, allowing them to sustain themselves. This enables many overseas creators to relatively freely create niche content they enjoy while also effectively directing traffic to private domains.

Thus, in facing the competitive landscape of traditional social products in different regions, Web3 social projects can also consider different strategies to exert influence.

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

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

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

AI, as a tool for enhancing productivity, has empowered the social domain, with a particularly noteworthy area being the combination of social interaction and AI agents. This involves using AI to create virtual girlfriends, boyfriends, and companions to meet human needs for companionship and emotional support. For instance, Character.AI, backed by A16Z, can generate human-like text responses and engage in contextual conversations, creating intelligent chatbots for user interaction.

As mentioned earlier, one of the core human needs for social interaction is to fulfill emotional and psychological needs, establish close relationships, and gain support. Currently, AI + social projects primarily focus on meeting human emotional needs by providing virtual companionship to address real-time companionship demands that cannot be met by real people, exploring new possibilities for fulfilling these needs. However, whether human emotional companionship needs to be realized through AI virtual beings is still in a phase of market and value validation.

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

Additionally, there is also Siya.AI on the Solana ecosystem, which aims to build a social companion platform where AI and real people coexist, hoping to use AI agents as entry points for internet and Web3 users. Furthermore, by integrating the SDK provided by Realy, it introduces incentive mechanisms for creator economies and AI companions. By combining AI and Web3, it aims to address the emotional companionship needs in social interactions. Users can engage in conversations with AI boyfriends and girlfriends, achieving chat mining and NFT incubation.

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

Conclusion#

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

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

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

However, current Web3 social still faces some challenges, with no large-scale applications emerging to date. High replacement costs and network effects are significant challenges. Traditional social products have established strong network effects among users, making it difficult for them to migrate to new Web3 social platforms due to user habits, resource investments, and platform dependencies. Another challenge is balancing sustainability and user experience. Some Web3 social products sacrifice user experience and convenience in emphasizing decentralization and data control. Maintaining product usability and attractiveness is crucial for user retention and attraction while pursuing innovation.

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

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

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

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

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

Author: Fred

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