How can blockchain and Web 3.0 solve social media’s ills? In a special two-part series, Forkast.News examines the potential and pitfalls of decentralized social media. Part 2 is here.
More than 2,000 people from around the world descended on Lisbon recently for the first major global conference for the world’s fourth-largest blockchain by market cap, Solana. “Breakpoint Conference 2021” was host to dozens of events. One particular announcement arguably stole the show: a US$100 million investment to help build decentralized social media applications on Solana. Seven Seven Six, the venture capital arm of Alexis Ohanian, co-founder of social media giant Reddit, partnered with Solana Ventures on what Ohanian called a “pivotal inflection point” in these early days of Web 3.0.
The predecessor of this concept — Web 2.0, what we are living with now — was born of the advent of social media and the growth of e-commerce, allowing peer-to-peer communication of information in ways unheard of before. Now, as cryptocurrency becomes increasingly integrated within more digital platforms, some speculate the nature of the internet is shifting to the communication of value — Web 3.0. And as the main point of contact with the internet for most of us, social media is no different.
“How do we rebuild social media? It’s done great good in the world, but the ad model is pretty broken, it creates strange incentives,” said Austin Federa, head of communications at Solana Labs, in an interview with Forkast.News. “Users of a platform are not owners of a platform; it breaks that relationship. And so, there’s an inherently exploitive and rent-seeking model that’s [intrinsic to] any sort of system built in that way.”
There is no shortage of scandals within social media companies of late, demonstrating this idea of corrupted incentive structures pushing platforms to prioritize profits at the expense of the well-being of their users — or even society at large. Major concerns around the changing nature of social media’s role in society were first raised with Facebook’s involvement in the Cambridge Analytica scandal surrounding the 2016 U.S. presidential election, where questions were raised about how the company handled users’ information and the impact it may have had on that election. More recently the company has been rocked by a series of scandals, with company whistleblowers revealing that Facebook knowingly toyed with its algorithms to present divisive content at heated moments in the past 12 months in order to maximize profits.
“There was an old analogy that these social media companies were town squares — and they weren’t,” Federa said. “They’re private, for-profit corporations that mine your data and use it to sell ads. Yes, they deliver value back to you in exchange for that, but if we really are talking about rebuilding the world, rebuilding social institutions to exist in these open spaces that can’t be run by any corporation, that needs to be community-owned, that needs to be built as a giant digital co-op.”
Federa and others argue a decentralized social media platform could address many of these issues. Decentralized hosting takes control out of the hands of a select few and distributes ownership and responsibility throughout the entire community. Integration with cryptocurrency allows content creators to earn directly from the community, reducing the reliance on advertising as a driver of content. Non-fungible tokens will allow the ownership and sale of digital assets and further integration with games and metaverses. What’s not to like?
“Web 3.0 is going to blur a lot of those distinctions because those were really business unit distinctions,” Federa said. “They weren’t necessarily inherent product distinctions.”
Changing the incentive structure
Of course, there are platforms trying to live this ethos right now. “Voice” is an NFT platform trying to bridge the gap between Web 2.0 and 3.0 and enable a community to flourish around the creators who use their platform. Launched in January 2019, the firm initially set out to become the first social media platform to have a governance token licensed by the U.S. Securities and Exchange Commission. Unfortunately, between a change of administrations and time constraints, that plan eventually fell through, but not without the team learning a few things along the way.
“What we found was that the future of social media is not is not just a tokenized version of Facebook,” Salah Zalatimo, CEO of Voice, told Forkast.News. “What we realized a year into it and with the emergence of NFTs is that crypto and blockchain actually enable us to do better things altogether. That’s the definition of disruption, right? Blockchain has so much power that for us to simply innovate on social media just wasn’t enough. And honestly, we didn’t believe that it would be enough to bring the people, to have people switch. But if we can use blockchain and NFTs and the potential to fully disrupt social media as it is today and actually make it obsolete? Well, now we’re talking.”
Through their ability to transmit value digitally, Zalatimo sees NFTs putting economic value and governance back into the hands of communities — allowing micro-communities to become autonomous and earn interest on the value generated by their own users through appreciation. Once that capability is introduced, suddenly there is a massive platform of engaged users, who have all contributed to and can share in the profits of the network.
“We believe the near future of social media is a far more disaggregated, decentralized ecosystem of micro-communities, all powered by independent tokens and blockchain, both by non-fungible and fungible tokens,” Zalatimo said. “So, therefore, yes, we are a social media platform, but not in the Web 2.0 sense. It’s in the future Web 3.0.”
But not everyone believes this is all necessary to make the changes that people want to see in social media. Launched over 10 years ago and with over 55 million downloads, “YouNow” is a top 50 social media platform with a focus on live video streaming. Based on a subscription model, the on-site economy is based on users giving content creators “gifts,” which translates to likes, which in turn can be shared around to other content creators or cashed out for fiat. Using this funding model, it does not have to rely on advertising, which radically changes the incentive structures for content creators on the site.
“There are no ads on the network, which means that our creators do not have to go for things that are for scale,” YouNow CEO Jon Brodsky told Forkast.News. “You go on any other social network that’s focused on video and they’re basically doing whatever they can to be as extreme as possible so that the algorithm picks them up and they keep going. That’s not what we are about. We are about actual human connection and people you enjoy spending your time with.”
Brodsky added that because content creators are paid directly through their followers rather than a percentage of advertising revenue from across the entire platform, creators on YouNow are able to earn just as much, if not more, than creators on other sites who may have a greater viewer or subscriber models. Because they are “getting paid what they are worth,” as he describes it.
Proponents of cryptocurrency might look at this situation and think there was a perfect opportunity to introduce a governance or utility token into this on-site economy. YouNow had tried that system but it had not worked out too well for them. For many years, YouNow was integrated with Props, a third-party protocol that allows platforms to incorporate community tokens into their own services. Through Props, YouNow allowed users to earn tokens and have ownership stakes in much the same way a Web 3.0 decentralized platform would.
Until the program was canceled in mid-October, the Props protocol sat on top of the usual economic model of paying creators through fiat and the gift system. Brodsky was a believer in the product, saying it had an “all-star backing” and was fully regulated by the SEC, but there was only one problem.
“It did not work,” Brodsky said. “It was not a huge driver for the general public. When we look at it, there were certainly people who are crypto heads who really loved it, but that was a tiny percentage of our user base, just like it’s a tiny percentage of world population.”
Cryptocurrency analytics firm Triple-A found that global cryptocurrency adoption stood at an average of 3.9% across the globe as of 2021, though with the explosion in popularity of crypto over the year, that number is likely to grow considerably.
Despite the relatively low level of engagement with the product, YouNow was happy to continue using the protocol, but unfortunately due to declining business on their end, Props canceled the partnership. It follows a similar story with a similar protocol called Ken, with both still in operation but on a small number of networks.
“[It] wasn’t capturing the imagination of users across a wide variety of networks the way you would have hoped,” Brodsky said. “It makes me fairly cautious when I hear about decentralized social media.”
Part 2 of this two-part series explores moderation and concerns over transaction speeds and selling the concept to the public.