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Web3 Social - A Booming Space With an Identity Crisis

0xlingchenliu.eth
Web3 Social: A Booming Space With an Identity Crisis

We explore the values and importance of web3 social and deep dive into the market landscape and leading protocols, reflecting the challenges and the areas to explore in this space.

– by @lingchenjaneliu and @FundamentalLabs

DISCLOSURE: FUNDAMENTAL LABS AND MEMBERS OF OUR TEAM HAVE INVESTED AND MAY HOLD POSITIONS IN TOKENS MENTIONED IN THIS REPORT. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

SUMMARY

  • Existing Web2 social networking platforms cause issues like data and security breaches, manipulation of public opinion, and relaying false information.
  • Digital assets created according to interoperable standards on public blockchains are portable and transferable so user history is not stuck on a particular platform.
  • A core philosophical principle of Web3 is that there are more ways to provide value to an ecosystem than through capital - value should be able to be earned, not just purchased.
  • Open social stack includes data infrastructure (decentralized storage and data layer), middleware (digital identity, social graph, and credentialling protocols), and social applications
  • Social networking platforms often face the cold start problem. With the open social stack, new platforms can leverage middleware to develop products and rapidly test product-market fit.
  • The most important problem that needs to be solved for a decentralized social is the decentralized storage of dynamic data. Protocols like Ceramic Network and Tableland are tackling this challenge.
  • Every social network depends on a social graph. Leading protocols building an open social graph with strong ecosystems are Lens Protocol and CyberConnect.
  • The challenges that Web3 accounts and identities face are because the definition of wallet, account, and identity in Web3 is not clearly defined and the implementation of digital identity projects often mix those three concepts.
  • There should be an identity architecture to help users to access Web3 applications. Identity architecture includes identities to use in different scenarios: public identity, proxy identity, and master identity.
  • Challenges we see: 1) financial incentive driven socializing; 2) data composability is not as easy as we thought; 3) poor user experience leading to a small user base; 4) not solving painpoints and creating value for users
  • Web3 social can only succeed if the existing address-based identity can shift to individual-based identity and focus not only on contractual status, which shows the assets that address holds but also on relational status, the social status that a person acquires through relationships with other people.

What is Web3?

Web3 is an umbrella term without an established definition. The term encompasses several ideas and visions of decentralization which are powered by community and user ownership. An article written by Him Gajria about Web3.0 said it best:

  • Web1 was read-only
    • Web hosting content
    • people can consume content but not share it
  • Web2 is read-write
    • Web enabling user participation
  • Web3 will be read-write-own
    • built on peer-to-peer networks
    • enabling interoperability, which is the ability of different applications to connect and communicate in a coordinated way

In the Web2 world, the category that dominates the Web is social networking, such as Facebook and Youtube. Social networking allows users to interact with the network, not just consume its content. The Web3 social ecosystem has seen an influx of financing in Web3 social startups. Although Web3 has yet to see a platform equivalent to Twitter or Facebook, many people believe that the narrative of data ownership and financial incentive of the network, NFTs, and tokens will solve the cold start problem and eventually bring enough creators and audiences to the platforms.

The Need for Web3 Social

Web3 proposes a different value proposition and is a fundamentally different approach to Web2, which is dominated by centralized platforms. Chris Dixon explains the inherent issues of centralized platforms in this article. Centralized platforms follow a pattern that once the platforms hit their reflection points where adoption rate of users and creators are high enough to create strong network effects, the network actors are sacrificed for the growth of platforms. The growth engine after platforms hit that reflection points usually comes from extracting user data for advertisement revenue, resulting in data and security breaches. In addition to data and security breaches, social networking platforms can also cause psychological and societal issues, including addiction, mental illness, manipulation of public opinion, and relaying false information. Recent condemnation of social networking platforms doesn't just come from authorities and users. Developers who used to work for notable social networking platforms also stood up to share their condemnation: in the documentary "The Social Dilemma", developers reveal how social networking platforms leverage user data to develop their products which creates positive intermittent reinforcement in users' minds.

Facebook Structure
Figure1: How does Facebook work?

Based on the premise that there is an alternative to exploiting users for data to make money and create stickiness to platforms, the Web3 social stack aims to build open platforms on which users can own whatever content they have created, digital objects they have acquired and even their social graphs. Digital assets created according to interoperable standards on public blockchains are portable and transferable so users are not stuck in particular platforms.

What is a social graph?

A social graph is a diagram that illustrates interconnections among people, groups and organizations in a social network. Existing social networking companies like Instagram, Facebook, LinkedIn, etc. consist of such mapping of social relations among individuals.

Web2 vs. Web3
Figure 2: Brief overview of Web2 vs. Web3 infrastructure

Existing dominant internet platforms are built on aggregating users and user data. As these platforms have grown, so has their ability to provide value. The platform network effect enables those dominant platforms to stay ahead. Dominant social networking platforms' data on user behavior helps them optimize their algorithms to a point that their content feed and ad targeting are significantly better than what competitors can offer. Amazon obtains comprehensive data to understand customer demand so that it can optimize delivery logistics and develop its own product lines based on analytics of profit margin and consumer demand.

In traditional internet platforms' business models, users and their data are key sources of competitive advantage. As a result, platforms typically do not share data. Therefore, if users decide to leave the platform, it is hard for them to bring their social graphs or content with them.

Why are identities siloed?

Internet companies that we interact with have their own databases. Data is siloed since the data among those companies are disconnected. In contrast, databases in Web3 can communicate with each other in an open and accessible way.

In Web3, instead of accessing a closed network that is owned and operated by a centralized Infrastructure as a Service (IaaS) provider, users access a public network that is operated by thousands of independent nodes that abide by strict rules defined by the code of the network. Users and enterprises can build and contribute to Web3 apps (decentralized apps), communities (decentralized autonomous organizations), and the infrastructure that powers these (node infrastructure). This means that there is no single entity that can control access to data on the network, and any attempt to do so will be rejected by other nodes on the network.

In essence, data is stored on a network of independent nodes which all individually ensure that only the data owner can decide what happens with their data. This is in stark contrast to centralized server controlled by a Web2 cloud service provider.

A core philosophical principle of Web3 is that there are more ways to provide value to an ecosystem than through capital - furthermore, the value should be able to be earned, not just purchased. This is a radical distinction from existing structures, where people who own capital earn more through investment than people earn through work - leading to a widening wealth gap over time. Assigning ownership to participants is also a significant shift. Existing platforms are built by employees and investors, where meaningful ownership goes to employees and investors. In this traditional Web2 model, ownership is not ascribed to users whose content and contributions make those platforms valuable.

Open Social Stack: Current Market Landscape

Web3 Open Social Stack
Figure 3: Market Landscape of Open Social Stack

After I took a close look at existing projects building the open social stack in Web3, I mapped out the market landscape including multiple components and layers (see figure 2). In addition to the bottom layer, including data infrastructure and decentralized storage, middleware, such as decentralized identity, social graph and credentialling protocols, is a key layer in the whole open social stack. Any applications can permissionless be built upon them and use the pre-existing user network without building their own from scratch.

Open social stack overview

  • Data infrastructure: data infrastructure includes decentralized storage and data layers built for dynamic data and catered to the needs of social applications, which produce large amounts of low-value data. (Related Reading: Decentralized Storage - A Pillar of Web3)
  • Middleware: Middleware is a type of computer software that provides services to software applications. Middleware speeds development of distributed applications by simplifying connectivity between applications, application components, and back-end data sources. Common middleware for open social stack includes digital identity, social graph, and credentialling protocols.
  • Social applications: Social applications are software applications that facilitate the creation and sharing of information, ideas, interests, and other forms of expression through virtual communities and networks. In Web2 there is Facebook. Instagram, Youtube, and Tiktok. In Web3 there are Orbis, Lenster, lvl protocol, and Cent.

The open social stack creates a paradigm shift that is incredibly powerful with portable and pluggable identities that live in users' crypto wallets. If we think about it, our Web2 online activities are a form of our identities. The photos that we post on Facebook and Instagram as well as the profiles we create on Twitter and Linkedin are part of our identities. The challenge that we face here is that our identities only live in the platforms where our behaviors/activities take place and the identities are siloed. With the walled gardens erected by Web2 giants, we cannot just integrate our Instagram identity and plug it into YouTube to fine-tune content recommendations to match our interests.

Social networking platforms usually face what is called the cold start problem: it is hard for new platforms to acquire and onboard new users. That is why growth hacking holds a very important and prominent role in the traditional internet industry. With the open social stack in Web3, new platforms can leverage middleware, such as social graph and credentials, to develop products and rapidly test product-market fit. With data being transparent, competitors can look at the data of the dominant platform and target high-network value users to give relevant incentives and attract them to their platform. However, as users can easily port their digital assets into different platforms with zero switching cost, platforms will need to compete with one another with better user experiences and build a closer connection with their communities to align missions and values.

Let's take a look at each layer within the open social stack.

DATA INFRASTRUCTURE

The most important problem that needs to be solved for decentralized social is the decentralized storage of dynamic data, and the protocol needs to be able to support dynamic data storage before it can support streaming, social media, and other related applications.

As social networking applications tend to produce sizable but low-value transactions, for example, sharing, liking, or following, it is not economically feasible to conduct those transactions on Ethereum. Therefore, it is important to find a scaling solution to facilitate transaction settlement.

Due to the immutable nature of on-chain data, it is hard to build social applications on top of the data layer. However, there are some protocols trying to solve this issue, such as Ceramic, Livepeer, Lit Protocol, and Tableland. These protocols are designed to manage and store dynamic data, like images, videos, and text.

Ceramic Network

Ceramic Network Structure
Figure 4: How does Ceramic Network work?

Web2 applications run on code and their features, content, and product recommendations are driven by sophisticated algorithms fed with user data. The information that populates websites that users see whether it’s user data or application data is usually driven and determined by platform-designed algorithms. In the contrary, the Web3 stack and dApps in the space we have seen so far lack those data-driven features. The fundamental reason for that comes from the immutability of on-chain data. Ceramic Network is trying to tackle this issue by providing a data layer on top of IPFS to manage and track state transformations and associate the data to data structures that make data easy to read and write. The protocol enables mutable data tables that are tied to users and therefore, data-driven applications can be built on top of it.

Benefits of Ceramic Network

  • Users: When data is stored on IPFS, it is hard for user to track data over time. However, with Ceramic, data gets saved with the users associated to the key and the identity that they're bringing with them with any blockchain wallet. Every time a user comes to an app, data gets recorded in Ceramic on IPFS. The data corresponds to data models that app developers create, and when users go to another app, users can bring the data with them.
  • Developers: For developers, Ceramic has shared databases to structure data for building data-driven features. Ceramic has a data model marketplace for developers to create their own data models that correspond to specific features they want.

Tableland

Tableland, the same as Ceramic Network, tries to tackle the limitations of the Ethereum Virtual Machine (EVM) where the storage in a smart contract is limited in space and also costly to update, write and store data on-chain.

Existing Web3 apps usually use a hybrid method to store application data. Take NFT projects for example NFTs in these projects exist in two parts: smart contracts and the metadata for the artwork. Smart contracts exist on a blockchain, usually Ethereum, and contain a set of rules to facilitate transactions. Smart contract also includes a link that points to the server that stores the digital artwork. That being said, the digital artwork may not live on a blockchain and may be stored off-chain. NFT projects usually leverage centralized database like AWS or Google Cloud for structured data. However, leveraging decentralized storage providers to host their metadata is relatively a more secure choice as there is a potential risk that if a centralized server goes offline, digital artwork would be lost. While with decentralized storage providers, if a storage location (a node) goes down in one spot, the digital artwork may be found in another storage location. The downside of the current method of storing on decentralized storage is that the metadata itself cannot be changed and is also hard to be queried or composed. In contrast, a centralized storage provider enables metadata to be dynamic and also supports query capabilities. But data stored in centralized storage providers is neither open nor composable.

Tableland provides a technical solution to deal with the limitations of on-chain data - immutability, expensive to store, incomposable and difficult to query. Tableland has built a data layer and the data layer allows users to store, read and write data with more storage space in a cheaper way compared to pure EVM environment. How Tableland does it is through two components: on-chain registry with Access Control Logic (ACL) and off-chain tables. Each table in Tableland is minted as an ERC721 token on the EVM-compatible layer. That being said, the access control for having the right to write data lives in the EVM and users own the right via an NFT that is stored within their Ethereum wallet. The protocol has two major components: on-chain table owner and off-chain Tableland Network. The link between on-chain and off-chain is all handled at the smart contract level, which holds the immutable quality.

  • On-chain table owner: sets ACL privileges for a table
  • Off-chain (decentralized) Tableland Network: manages the creation of and subsequent mutations to the table itself.

In short, Tableland is like IPFS plus a SQL layer on top, which offers more flexibility and adaptability.

Tableland Structure
Figure 5: How does Tableland work?

What is an Acess Control Logic?

Access Control Logic is an automated system that controls an individual's ability to access one or more computer system resources, such as a network, application, or database. A logical access control system requires the validation of an individual's identity through some mechanism, such as a PIN, card, biometric, or other tokens.

What is SQL?

SQL stands for Structured Query Language which is a language used by databases. This language allows to handle the information using tables and shows a language to query these tables and other objects related (views, functions, procedures, etc.). Most of the databases like SQL Server, Oracle, PostgreSQL, MySQL, MariaDB handle this language (with some extensions and variations) to handle the data. With SQL, users can insert, delete, and update data. Users can also create, delete, or alter database objects.

MIDDLEWARE

SOCIAL GRAPH

Every social network depends on a social graph. The Social graph is essential to all communications, from posts to likes to direct messages. A shared public social graph couldn't exist without a company or an entity in charge of storing the data. There are protocols trying to achieve that. (Related Reading: Decentralized Social Graph - the Infrastructure for Web3 Social Network)

Lens Protocol

Lens Protocol is a composable and decentralized social graph. Social applications include user profiles, followers, posts, comments, shares, and likes. Those components define the basic data layouts and the relationships between data like who follows who or who posts what content.

On Lens Protocol, key features of social media are powered by NFTs and owned by users. User profiles are also NFTs. Followers hold a follower NFT and every post represents a post NFT. (Related Reading: Lens Protocol - The Game Changer for Social Media)

NFTs on Lens Protocols

  • Profile NFT: A Profile NFT contains posts, mirrors, comments, and follows that a user generates. Individual addresses can own profile NFTs, an address can contain multiple profile NFTs, and a profile NFT can be owned and operated by a DAO through a multi-sig wallet.
  • Follow NFT: every time users follow another user, they receive a Follow NFT with a unique token ID.
  • Publication NFT: Content that is produced or shared can be a Publication NFT, which is similar to a post on traditional social media.
  • Mirror NFT: Similar to Twitter's retweet feature. Users use the mirror feature to re-share a post. Potentially, a user can take a cut from anyone who collects the original content due to the person's sharing.
  • Collect NFT: Users can collect (purchase) Publication NFTs from users they follow and create their own collections of Publication NFTs.
  • Comment NFT: Similar to traditional social media's commenting feature.
Lens Protocol Ecosystem
Figure 6: Lens Protocol Ecosystem

The social graph designed by Lens Protocol cannot be easily forked, since all data is stored as NFTs live in user wallets. Lens Protocol has a strong ecosystem with various applications built on top of it. Lens Protocol's ecosystem creates a strong position for it versus its competitors, as Lens Protocol's user base grows along with its ecosystem growth and more data will be fed back to the social graph protocol.

Lens Protocol Structure
Figure 7: How does Lens Protocol work?

CyberConnect

CyberConnect is a social graph protocol and allows DApps to access and use social graph data provided by users. The ecosystem of CyberConnect is strong with a lot of Web3 applications integration, including Project Galaxy, Mask Network, Light.so, Grape.art, NFTGo, Metaforo, zklink and so on.

There are two parts in CyberConnect's social graph: 1) the follow button; 2) following and followers lists. Web3 applications can just plug the social graph module from CyberConnect to develop their own applications, which can help with the cold start problem and can also return data ownership back to users. Therefore, users can move between applications with their own social graphs. CyberConnect's solution allows users to have a more holistic identity across all applications.

CyberConnect Structure
Figure 8: How does CyberConnect work?
CyberConnect Ecosystem
Figure 9: CyberConnect Ecosystem

Traditionally, a social networking application builds its moat not just through good product design and user experience but also through user data powered network effects. Therefore, it is hard for newcomers to shake up the status of dominant social networking platforms since users cannot just bring their data to another platform and enjoy the same experiences without setting up a new profile, connecting to people, and creating enough data for the platform to provide better recommendations and do a better job at content curation. The cold start problem is one of the biggest problems for social networking platforms to overcome. Without preliminary data, it is hard to bootstrap a new social network.

What is the Cold Start Problem?

The user or visitor cold start simply means that a recommendation engine meets a new visitor for the first time. Because there is no user history, the system doesn't know the personal preferences of the user. Knowing visitors is crucial in creating a great user experience for visitors.

IDENTITY

Identity is a person's sense of self, established by their unique characteristics, affiliations, and social roles. Moreover, identity has continuity, as one feels to be the same person over time despite many changes in their circumstances. Identity in Web3 is so far composed of low dimensional data and usually emphasizes its decentralized nature; therefore, decentralized identifier (DID) is the most common solution for Web3 identity.

What is the decentralized identifier (DID)?

According to W3C, decentralized identifiers (DIDs) are a new type of identifier that enables verifiable, decentralized digital identities. A DID refers to any subject (e.g., a person, organization, thing, data model, abstract entity, etc.) as determined by the controller of the DID.

on-chain identity vs. real-world identity
Figure 10: identity on-chain vs. identity in the real world

Why do we need DID?

  • DID allows for the creation of unique, private and secure peer-to-peer connections between two parties.
  • The decentralized nature makes credentials always available for verification.
  • Each party – an individual or organization – can create as many different DIDs as they wish. Using separate DIDs for different digital relationships and contexts prevents data correlation.
  • DIDs are entirely controlled by the identity owner. DIDs are independent of centralized registries, authorities or identity providers.

Authentication method transition to password-free approach

If we learn from authentication processes in Web2 or physical world, in the early days, most Web2 applications used account + password as the authentication method. Users usually set the same account name and password for different websites and platforms, which is very insecure.

When mobile devices and applications emerged and dominated most of users' time, applications started to adopt a new authentication method - mobile phone number and verification code. For the convenience of users, many applications adopted one-click verification based on Google/Apple/Wechat/Alipay. The applications supporting only account ID + password started to diminish.

With the development of biometric technology, devices are not switching to use biometric authentication methods, such as face ID or fingerprint verification. Web2 identity verification is developing in the direction of secure and convenient password-free authentication.

Account separation and identity aggregation

In China, as internet giants such as Tencent and Alibaba have multiple applications across financial, social, entertaining, and e-commerce services, they developed a well-rounded credit system based on users' historic transaction data, social behaviors, and identity verifications. Most of the applications in China support one-click log-in with credit system and credit score from Wechat (WeChat is a Chinese instant messaging, social media, and mobile payment app) and Alipay (Alipay is a payment app and digital wallet under Alibaba). For example, when a user borrows a shared bike, the person can scan the QR code on the bike with Wechat or Alipay to unlock it without signing up and creating a new account. The user experience becomes smooth and seamless with only one authorization away. This is a perfect example of account separation and identity aggregation. The aforementioned credit system/credit score is our aggregated identity in digital world, which is a system including users' identity data and credit ratings. Applications can apply for an authorization to read users' identities and create temporary accounts by simply integrating the credit system in their applications. Identity and account experiences like this are needed in Web3. Users should be able to easily participate in DeFi, play games, and interact on social applications with different accounts but with an interoperable identity across accounts. 

From wallet addresses to identities

A user in Web3 usually has multiple wallet addresses on different blockchains due to safety and privacy concerns and because the cost of creating a new wallet address is close to zero. On top of that, a typical internet user also has accounts and social profiles across various Web2 applications, such as Twitter, Facebook, and Google. Currently, there are multiple DID projects built to tackle different aspects surrounding Web3 identity and account issues. The concept and implementation of DID are mixed with wallet, account, and identity and the definition of those three concepts in Web3 are still blurry and not clearly defined. Often time, we see wallet as an account and an account is taken as an identity. Therefore, it is important to propose an identity architecture to better help users access Web3 applications. Identities to use in different scenarios: public identity, proxy identity, and master identity.

  • Public Identity
    • Purpose: Public identity's main role is to facilitate external relationships to identify users' identities and make identities more readable in social relations.
    • Use case: A public identity is a collection of credentials, identifiers, behaviors, relationships, and reputation. The public identity can actually be united with the proxy identity and share the same account address depending on user needs. For example, if some users pay more attention to security and privacy, then their public identity can be a separate account, dedicated to the user's external presentation and relationship building.
    • Examples: ENS, lens, and Nametag.
  • Proxy Identity
    • Purpose: The purpose of proxy identity is to disconnect wallet address and account so there is a firewall between wallet and application.
    • Use case: Users can create a series of accounts with exclusive functions, such as social accounts, gaming accounts, trading accounts, and anonymous accounts. All proxy accounts can be controlled by master identity, which can be used to reset the key.
    • Examples: Unipass, Spruce ID, Web3Auth and IDX
  • Master Identity
    • Purpose: Separation of account authorization and account access.
    • Use case: This identity is used to authorize proxy identities when proxy identities are created. Users can manage their wallet accounts like in Web2 applications. The key to the wallet accounts can be retrieved and reset when risks are detected or keys are lost.
    • Examples: Web3Auth, ERC-4337 account abstraction

SOCIAL APPLICATIONS

Front-end applications are the user-facing layer. Use cases range from social media, video streaming, and community tools. Social applications can leverage middleware projects, such as open algorithms, public social graphs, and open digital identities to tailor and optimize their products. With middleware of open social stack, multiple applications can exist on top of the same user data and infrastructure components. This shifts the competitive dynamics. It will be very hard for applications to fend off competition and establish competitive advantages as users can move across different applications without friction. Therefore, for Web3 applications, they will need to experiment with approaches of user acquisition, retention and monetization models.

Web3 Social: All Sizzle and No Steak?

Web3 social space has been sizzling hot with developers and capital pouring in the space but no protocol dominates the market yet. Why is that? We will explain the challenges and discuss where we can explore to accelerate the growth of this space in the following paragraphs.

Challenges for Web3 Social

From financial incentive driven socializing to connection driven socializing

True socialization happens when users form connections with others when they share common interests, topics, and backgrounds and the socialization on chain is still far away from real-world socialization. The reasons behind this are:

  • Speculation and financial incentive-driven behaviors: Currently, the social behaviors on chain are based on speculation and driven by financial incentives. The socialized data on chain are not based on behaviors that users trying to build natural and effective connections with others.
  • Is the counterpart a real person or not: Socialization itself is the interaction and connection between people, and now in Web3, users interact with addresses. The current technical reality is that addresses only hold data such as transaction history and assets held. Since such data does not help to identify real and valid target users, connection building is very inefficient and ineffective.

Data composability is not as easy as we thought

  • Although Web3 has the possibility of composability and applications are supposed to use different data models generated from various protocols, the reality is that protocols define their own data and business metrics based on their own business logic and operational needs. It is not realistic and pragmatic for an application to just grab and use whatever data models and algorithms other protocols created (see figure 12).
Data Drive Operations
Figure 12: How does data drive operations in Internet industry?

From factual data, for example browsing duration, ticket size, and purchased items, to business-level analytical data, like retention rate, and conversion rate, there are multiple steps involved. Data models and business metrics used for mapping user portraits and designing algorithms for social recommendations, content feeding, and target marketing are the truly valuable ones, which help optimize products and operations and drive business and user growth.

Better user experience can accelerate user adoption

  • Poor user experiences leading to a small user base:
  • There is too much industry jargon: airdrops, cold wallets, DeFi, diamond hands, fiat currency, hard forks, gas, hash rate, private keys, proof of stake, seed phrases, stablecoins and smart contracts to name just a few terms. It is very difficult to onboard a new user to a foreign field where research, content and applications are full of abbreviations and industry jargon.
  • Bad user experience is a major gap to mass adoption: User experience is not just about how the product looks, but also about how it works, how easy the onboarding is, how easy it is to use, how scalable the solution is, how practical the gas prices are, how fast the transactions are, etc. It is very difficult for non-geeky users to know how to add a network to their MetaMask wallets, differences between different chains and how to transfer tokens to different networks. When traditional Web has been working on developing user-friendly solutions for decades and older generation can use the Web intuitively, it is hard to persuade users to switch to Web3 when Web3 user experiences are generally not as good as Web2 user experiences.

Web3 should solve real user pain points and bring unprecedented value to users

  • Great narrative but business model is still unclear: Decentralization of data and information and ownership of data and content by its users is a great narrative to tell but decentralization itself is not actually of immediate practical or pressing importance to the majority of users when decentralization comes with a higher cost that users have to pay to use those protocols. In contrast, centralized platforms absorb transactionally and platform support costs, including storage, bandwidth, computing power, product development, and operations and leverage the data they collected to monetize and support the development and maintenance of the platforms. Web3 still needs time to find its native business model which should be unique from existing Web2 models. So far, we have yet to see business model innovation happen.

Where Can We Explore?

Digital identity is a crucial crypto problem to solve before social applications boom.

  • Web2 digitial identity is siloed and not fully defined by users
  • Existing digitial identities on Web2 are siloed and enclosed and live on each individual platform. Furthermore, due to the business models that traditional social networking platforms have been constructing, platforms create user tags based on their behaviors and also designed a series of algorithms that leverage those user tags to recommend content, increase user retention and stay time, and optimize their paid-advertising revenue. Therefore, users' digital identities are broken and scattered across multiple social networking platforms and partially defined by those platforms (user tags). Under the current model, users don't really have online accounts. The truth is that they rent accounts from companies and centralized organizations. As a result, users are exposed to the risk of having their digital identities hacked, manipulated, regulated, or lost.
  • Web 3 identities should be bound to individuals not addresses
  • Markets based on scarcity, reputation, or authenticity require identity tied to an individual. The word identity has multiple meanings: one is to indicate the subject, the concept that one person is different from another, i.e. the identity in one's ID card, which corresponds to "identity"; the other is to indicate the status, the description of the relationship between one person and another, i.e. the status or state in society, which corresponds to "status". So far the address-based identity only focuses on status, especially contractual status, which shows the assets that address holds. To build richer social applications, having relational status to show social relationships among humans is indispensable. Relational status can only happen when humans interact with humans.
  • Contractual status: The social status that a person acquires through the execution of a contract
  • Relational status: The social status that a person acquires through relationships with other people

Although the space has lots of projects, it is still in its nascency while developers are experimenting on how to put those building blocks within open social stack together with a sustainable business model without sacrificing user experience and Web3 vision. With soulbound tokens proposed by Vitalik, there are possibilities of mapping real-world relational status on chain. Thereafter, deep and human-based on chain socialization becomes possible.

What is Soulbound Token?

Soulbound Tokens (SBTs) are permanent, non-transferable NFTs, meaning that they can't be given away or taken from users' private blockchain wallets. Soulbound Tokens are digital identity tokens that represent the traits, features, and achievements that make up a person or entity.

Closing

Thank you for reading this research piece on Web3 social. If you enjoy research that seeks to uncover the fundamental building blocks of our shared Web3 future, consider following @FundamentalLabs.

If you are building this space, or have feedback on this research, please reach out to me @lingchenjaneliu so we can enhance this research and work on this space together.

Reference

https://ethereum.org/en/web3/

https://medium.com/variablelabs/web-3-0-e0d817ec05c6

https://future.com/why-web3-matters/

https://messari.io/report/the-open-social-map

https://multicoin.capital/2022/01/25/investing-in-web3-credentialing/

https://twitter.com/MrMallory_/status/1547679331446431745

https://mirror.xyz/imstone.eth/PBwVD6HucPun1prCKCWdJCktEdjY0piawvP-JKWA2h8

https://tykn.tech/decentralized-identifiers-dids/

https://knightcolumbia.org/content/protocols-not-platforms-a-technological-approach-to-free-speech

https://www.dsnp.org/introducing-dsnp.html

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763

Web3SocialTraditional Industry
0xlingchenliu.eth

Researcher at Fundamental Labs

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