A deep dive into social networks on the blockchain, how they compared to their centralized counterparts, and some of the most popular DeSoc protocols in the market now.
Decentralized social networks (DeSoc) have been long tipped to make a splash. You could see why: All big social media platforms are commonly criticized for the following reasons:
Bans.
Bots.
Echo chambers.
Hate speech.
And we still use them because…well, there’s no alternative. But DeSoc hasn’t exploited this weakness yet. This deep dive analyzes:
- What decentralized social networks are
- How decentralized social networks work
- The benefits and drawbacks of decentralized social networks
- Decentralized social media vs traditional social media
- Popular decentralized social networks
- The future of DeSoc
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What Are Decentralized Social Networks?
Decentralized social networks are social networks on the blockchain. They differ from regular centralized social media in the following ways:
- Built on blockchains instead of centralized servers.
- Decentralized in their ownership structure: users can own the network itself via its native token, as well as their own content in the form of NFTs.
- Permissionless: other protocols can build on top of them. You can’t just build an app “on top of” Facebook or other regular social media.
- Trustless: there is no centralized authority approving registrations.
The Difference Between Decentralized Social Media and Decentralized Social Networks
Attention, these are not the same!
Decentralized social media would be Twitter/Facebook/YouTube “but on the blockchain.” As another section explains, there are rough decentralized equivalents to traditional social media like Lens Protocol.
Decentralized social networks include all social protocols, such as:
- Identity and reputation protocols.
- Messaging protocols.
- Creator economy protocols.
Crypto.com produced a handy overview graphic in a research piece:
How Do Decentralized Social Networks Work?
There is a bit more to decentralized social networks besides being “X, but on the blockchain.”
The traditional way to build social networks looks like this:
Build MVP → Find followers → Keep improving product → Monetization
But for decentralized social networks, it looks something like this:
Bootstrap monetization via token → Find followers → Build MVP → Keep improving product
The next section will explain why that is a blessing and a curse. For now, it’s worth pointing out that DeSoc works with four layers:
- A data layer
- A social primitive layer
- An algorithm layer
- A front-end layer
The data layer consists of smart contracts and a content management system. This is the backend.
The social primitive layer defines data layouts and the relationships between data. For example, in Lens Protocol, a popular decentralized social graph, created content and follower data are NFTs. Thus, they could be used by other protocols to build something else on top of them.
The algorithm layer deals with moderation and content policies. Decentralized social networks have, unlike traditional social media, democratized algorithms, meaning they are transparent and community-governed. However, this could imply poorer performance since centralization, for now at least, equates to greater efficiency. In other words, the algorithm cannot improve as quickly and effectively as with regular social networks.
The front-end layer is the end product the user faces. These can be different front ends, depending on which social network is being built.
Monetizing Decentralized Social Networks
DeSoc is lacking when it comes to monetization models. Traditional socials monetize with advertising or subscription fees. Advertising is frowned upon in crypto. So DeSoc could go down several routes but none seems like a no-brainer.
Curation-as-a-service would work as a sort of “content affiliate service.” Creators that share content that then gets bought as an NFT could receive a cut of the proceeds. But would someone buy publicly available content?
Content subscriptions via staking sound romantic at first. But when you think about it, they are just as dilutive as regular subscription models. Instead of a clear revenue share between creators and the platform, the staking model uses a less transparent approach. Stakers still get diluted by token emissions, and the protocol providing the infrastructure still needs to get paid.
Taxing membership, for example in private networks, seems like an intriguing option. Users could pay a voluntary rate to be part of someone’s following. The creator receives a cut of this membership fee. Another user can at any time automatically outbid you for your spot by offering a higher rate to be a member. This model sounds interesting, though it may be too complex and too unproven for protocols to try.
Benefits of Decentralized Social Networks
On paper, decentralized social networks sound great and have many advantages.
Open-source
Unlike traditional social networks, the code is transparent and can be audited and improved by anyone. In a best-case scenario, this allows social networks to better align the interests of users and creators.
No single point of failure
This is not a regular problem for traditional social media, but outages and network attacks have happened. Decentralized networks are by design harder to attack. This also extends to protecting user data from hacks or malicious actors.
Crypto-native
Decentralized social media have monetization built in since, well, they are built for crypto. Even though no protocol has pulled this off successfully yet, this is probably the biggest appeal of DeSoc.
Privacy
Decentralized identity features and primitives will likely grow in the future. Instead of giving up information that can easily be linked to your real identity, such as phone numbers and email addresses, an Ethereum login would provide the maximum level of anonymity.
DAO integration
Decentralized Autonomous Organizations (DAO) are still young but an interesting experiment in incentive coordination nonetheless. Decentralized social media is the perfect breeding ground for DAO coordination. It could develop beyond mere black holes for attention and create genuine positive change.
Drawbacks of Decentralized Social Networks
There’s a reason the advantages of decentralized social networks sound good on paper only. Because when reality hits, the drawbacks have thus far easily outweighed the upsides.
The anti-network effect
The deep dive into blockchain network effects talked about the importance of network effects for the adoption of blockchain technology: the more users you have, the more users you get. Well, decentralized social networks are suffering from an anti-network effect. They have few users, which makes getting new ones even harder. Especially if you consider how “sticky” traditional social media is, meaning how hard it is to switch to a new network. Mastodon is finding this out the hard way.
Lacking economies of scale
The downside of any decentralized system is a decrease in efficiency. Censorship resistance and efficiency are diametrically opposed. You can max out only one. Therefore, decentralized social networks will never be able to scale as efficiently as centralized ones can. Whether they will be able to scale to such a level at all is also questionable.
Lack of good user experience
Wen good UX? Newsflash to crypto protocols: everyone’s accessing the internet from mobile these days. But you’d be hard-pressed to find a good protocol accessible from mobile, let alone a decentralized social network. No mobile, no users, no adoption. It’s that simple.
Cryptography and user experience already clash but designing algorithms that keep people informed rather than entertained is just as hard. Centralized social networks have been struggling with this problem for a long time. Twitter CEO Elon Musk is currently finding out that fixing the algorithm isn’t as easy as it looks. Crypto fans won’t like this but implementing policies that give users more rights on existing platforms is the far easier solution. As this quote from a Wired article puts it:
“[T]he world prefers running Windows and macOS over the much more flexible and customizable Linux operating systems. We choose convenience even when it comes at the cost of capability. We want things done for us. And, most importantly, we take a lot for granted with free services like Twitter.”
Decentralized Social Networks Vs. Traditional Social Networks
According to the Social Media Examiner, creators choose social media platforms based on three factors:
- Distribution
- Tools for creation
- Revenue share
No platform has found the perfect balance between those three. Some are lacking good revenue share (Twitter), while others are harder on distribution (YouTube). Web3 platforms do have a window of opportunity to disrupt traditional platforms. But they need to figure out how to empower users to create on their platforms and give them the right distribution tools.
In essence, decentralized social networks are in a race against time:
What will happen first: web3 social networks to gain traction or web2 platforms to adapt to blockchain innovation?
Reddit’s Approach to Crypto and NFTs
The example of Reddit and how it approaches the crypto challenge is instructive.
Reddit is a network of communities with common interests. It works similarly to how forums did back in the day: members post content, comment on others’ content, and upvote the best posts. This interest-based clustering of communities resembles a DAO more than it does social media. Reddit’s pursues a three-pillar crypto strategy: NFTs, social tokens and its own digital wallet
NFTs on Reddit are collectible avatars. They exist on Polygon and users hold them in Reddit’s own digital wallet called Vault. The platform drew the right conclusions from a subdued first NFT collection launch and focused on making their second generation of Collectible Avatars retail-friendly and as useful as possible. The launch was a success, and the collection accounted for 72% of OpenSea trading volume on Polygon in the two weeks after the launch.
Community points on Reddit are a signal of reputation: the more community points a user has, the more their content has been upvoted by others. Community points were first tokenized on an Ethereum testnet in May 2020. They are stored in user’s Vaults and exist on Arbitrum Nova. One example of a monetized version of community points is MOON, the coin of the r/CryptoCurrency subreddit. The top creators of this subreddit earn up to $1,000 and more in community points alone per month.
The native wallet called Vault can be created with a single-step process. It can also be recovered with the password only, which is stored on Reddit’s servers. Reddit prioritizes ease of interaction with blockchains over self-custody. This also extends to gas costs, which Reddit covers. Users de facto don’t know when or which blockchain they are interacting with.
This step-by-step “undercover” introduction of blockchain technology, if implemented well, can beat out crypto-native social networks thanks to the incumbents’ user base and network effects.
The Most Popular Decentralized Social Networks
Lens Protocol
Lens Protocol is a blockchain-based social graph that aims to create a decentralized social media environment through Web3 and ownership principles.
The Lens Protocol social graph is open-source, permissionless and offers content creators a chance to own their digital roots and connections to communities. In contrast to centralized options, it offers users full ownership and control of their profiles, connections, and content.
Additionally, the Lens Protocol's smart contracts-based social graph enables any blockchain-based social media platform or DApp to plug into it, thus securing social relationships and user-owned content. The protocol is now live on Polygon.
Minds
Minds is a decentralized, open-source and blockchain-based social media platform that emphasizes privacy, free speech, and user control. It was launched in 2015 as an alternative to mainstream social media platforms such as Facebook and Twitter.
Users can create profiles, connect with other users and share various types of content, including text, images, videos and live streams. Users can earn the native MINDS token by creating and engaging with content on the platform, such as by posting, commenting and liking content.
DTube
DTube is a decentralized video-sharing platform that uses blockchain technology to host and distribute videos. It was created as an alternative to centralized video-sharing platforms like YouTube.
DTube is built on the STEEM blockchain and incentivizes users to create and curate content. Users can earn STEEM by uploading videos, commenting, voting and sharing content. The amount of rewards a user can earn is based on the popularity of their content and the amount of engagement it receives.
Mastodon
Mastodon is a decentralized social network made up of independent servers organized around specific themes, topics, or interests. Once you've joined a server, you can follow, reply to and engage with anyone on Mastodon, no matter what server they are on.
Mastodon is run by a non-profit, hence there is no profit incentive and no desire to work with advertisers. Nonetheless, businesses can use Mastodon for market research, affiliate marketing, sponsorships and UGC campaigns.
Rabbit Hole
The Rabbit Hole is a Web3 platform that aims to onboard new users into the world of dApps and blockchain. It provides a gamified experience that helps users learn about web3 concepts and technologies, while also earning rewards and building their own web3 skills.
Users can complete challenges that require them to use protocols in practical ways and earn rewards in the form of tokens, which they can use to support projects, purchase NFTs, or trade on cryptocurrency exchanges. One of the key features of The Rabbit Hole is its social network, which allows users to connect with other Web3 enthusiasts, share their progress and collaborate on projects.
The Future of Decentralized Social Networks
Can decentralized social networks gain significant traction?
There’s a fair chance.
Can decentralized social media gain significant traction?
Possible but difficult.
Social networks like Rabbit Hole and publishing platforms like Mirror stand a good chance of attracting an audience if the adoption of crypto continues. They are for crypto-natives and add real value to newbies entering the space. Most importantly, they face much weaker competition from legacy companies.
Social media like Lens Protocol could have a harder time. Although these innovations are appealing at the protocol layer, they face technological and institutional headwinds. Until the underlying technology can support data streams at comparable levels to centralized social media, DeSoc faces an uphill battle.
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