Exploring the Future of Web3 Social: Token Incentives and the Digital Economy Ecosystem

This article is the third in a series on decentralized social networks, exploring how current technologies and trends are addressing the issues of decentralized social networks.

In 2017, researchers at the MIT Media Lab identified three major challenges facing decentralized social networks: attracting users, handling personal information, and user-facing advertising. They argued that the economies of scale enjoyed by tech giants make competition nearly impossible.

However, these "impossible" things seem to have become feasible today. We are at the dawn of a shift in the concept of social media. This series explores how decentralized social ( DeSo ) addresses these issues:

1. Use open social layer to solve cold start problem
2. Use identity verification and cryptographic techniques to solve user identity issues.
3. Use token economic models and incentive mechanisms to solve income issues.

This article focuses on the third point, which is how to address the income issue through token economic models and incentive mechanisms.

Create "Killer App"

The key to the success of Web3 social lies in whether it can produce a new "killer app," like TikTok or Instagram, that offers innovative social experiences to attract a large number of users. Without such an application, the development of infrastructure will lose a significant part of its purpose.

However, predicting this "new social experience" is almost impossible. Although the phrase "build killer applications" is often mentioned, no one knows exactly what it will look like. This article will explore two high-level strategies: enhancing existing social experiences by adding Web3 features, and creating Web3-first social communities.

Enhance Existing Social Experiences through Tokenization

The easiest way to build "killer applications" for Web3 is to add new features to mainstream social platforms, often in the form of tokenization, such as X-to-Earn projects.

Reddit's Moons program is an interesting example. Launched in May 2020, the program rewards users of the r/CryptoCurrency subreddit for posting and curating content. Reddit Moons is an ERC-20 Token issued on Arbitrum Nova, with supply based on the "reputation" users earn on Reddit. Moons allow users to participate in community voting to decide future allocations and development direction.

The tokenomics of Reddit Moons has been appreciated by the community, with a monthly issuance decrease of 2.5% and an annual inflation rate approaching 1%. In the long term, the "ratio of reputation to Moons" is expected to gradually decline, increasing the scarcity and value of Moons.

Reddit is a particularly interesting case as it integrates Web3 functionalities into existing "killer applications." Reddit may be the most decentralized and community-driven mainstream social platform, thanks to its unique "subreddit" structure. These design decisions make Reddit a suitable platform for experimenting with Web3 mechanisms.

However, there are still doubts about whether the simple "post to earn" mechanism can be successful in the long term. Data shows that most users have meager earnings, which may lead to user disillusionment with such projects.

Therefore, overly emphasizing "making money" may not be sustainable. Instead, new social experiences that users are willing to pay for should be created. The friend.tech project on the Base network highlights this. The project is essentially a "stock market for X profiles," where users can buy and sell "stocks" of influencers to gain increased access.

This novel social experience has generated a large trading volume in a short period of time. However, there are concerns about whether friend.tech can maintain its momentum, including issues related to privacy policies and data collection practices. Nonetheless, it remains an interesting experiment in transforming tokenization into a new form of social experience.

Build the First Social Community of Web3

Another way to create a "killer Web3 social application" is to build from scratch, starting from a unique crypto-native community and culture.

Phaver is a typical example. It is built on the social graph of Lens and attracts the Web3 native community by integrating with other Web3 social identity technologies. The platform uses a rating system composed of "reputation" and "points," allowing users to earn rewards and privileges through upgrades.

Phaver has created an innovative token economy system to establish a Web3-first social community. However, the main challenge is how to expand the audience and attract users without Web3 experience, while providing them with clear reasons to use it.

POAP is another noteworthy project that stems from the "conference culture" in the crypto space. POAP is an NFT that represents proof of a user's attendance at an event or conference. It could become a way to launch social networks and find like-minded individuals.

Conclusion

The long-term success of Web3 social must create new forms of social experiences, rather than simply replicating Web2 mechanisms with the labels "on-chain" and "tokenized." There needs to be a quality new experience, especially one inspired by and rooted in Web3 culture.

To enable "killer apps" to reach a broader audience, there must be easy-to-understand use cases, rather than a saturation of Web3 terminology and concepts. Web3 social must leverage the distribution and abstraction techniques of traditional social media to "go viral."

Successful Web3 social media needs to have an open design space, allowing users enough "blank canvas" to create their own use cases. Only when Web3 adopts this design decision, rather than focusing on financialization and on-chain imitation, can we truly begin to build brand new "killer applications" that expand Web3 social into mainstream forms of social interaction.