Earlier this year, Twitter abruptly shut down third-party apps. Weeks later, it eliminated free API access, and its cheapest plan now costs $42,000 per month.
By now, most users have adapted to this reality. Our most important social media apps, from Facebook and TikTok to WeChat and Grab, are centralized platforms. While these platforms are generally docile, they occasionally exercise power in capricious ways that highlight centralized authority, such as censoring and banning users based on vague content policies or arbitrarily elevating certain users.
These platforms are essential to our daily lives. As a result, users are frustrated with the status quo but don’t have many options. Therefore, decentralized social media is a key focus in the Web3 movement. Since the Crypto industry runs on Twitter, building a “decentralized Twitter” is more attractive to Web3 founders because they are well aware of Twitter’s pain points.
This report explores decentralized social (DeSoc) protocols. We review various DeSoc designs and focus on interesting projects. We also analyze the pros and cons of each protocol's approach and outline our views on the entire vertical.
The value of social graphs
Since its founding, Twitter has raised $4.4 billion in capital in 19 rounds of funding. When it went public, it had accumulated losses of nearly $1 billion. However, the product itself has barely changed in the past five years.
However, Twitter is still extremely valuable, with a valuation of at least several billion dollars. If it were auctioned today, there would undoubtedly be a large number of buyers willing to bid for Twitter's revenue at a generous valuation.
The key value of Twitter and any social media platform lies primarily in its social graph. Features are commodities (see: Clubhouse’s Spaces, Snapchat’s Stories, TikTok/Douyin’s Short Videos). But a unique and differentiated social graph is extremely valuable, and it’s what allows niche platforms to grow and maintain share amid fierce competition (e.g.: Bilibili, GitHub, LinkedIn, Twitch). Conversely, a weak social graph frustrates users and leads to a death spiral (e.g.: Clubhouse, MySpace, Friendster, Vine, Renren, YY, Digg).
Incumbent platforms noticed this early on and captured value by locking users in. As a result, most users are locked into incumbent platforms with few viable exit options.
Decentralized social networks promise to return value derived from the social graph to users. The overall argument suggests that this approach eliminates rent-seeking behavior and promotes more competition in products and features, ultimately creating value for users.
The Promise of Decentralized Social Networking
Censorship resistance and ownership
One of the most obvious benefits of building the DeSoc protocol is open access. Decentralized social networks should allow two users to find each other and communicate with each other, even if all other users want to prevent such communication. These networks should also allow users to publish content and find the content they want.
This is not to say that centralized filters can’t be applied on top of it. We can draw on the relationship between Gmail and decentralized email protocols (SMTP, POP3, IMAP) to imagine what a strong decentralized social network might look like. Although Gmail is a centralized application, users can choose other clients or have their own domains, giving them more control over their data, privacy, and communication preferences. The cost of substitution is negligible.
Most DeSoc protocols have a similar architecture. Therefore, users truly own their own social graph and can exit any application freely.
Composability brings innovation
Open access to decentralized social protocols is likely to lead to faster and more significant innovation among applications based on them. This is consistent with the previous point - if user exit costs are low, apps must compete to provide the best user experience.
In fact, Twitter had a similar cycle of innovation when its API was relatively open. Many of Twitter’s inventions originated from outside developers. Twitterrific coined the Twitter bluebird logo and the word “tweet”; another third-party client, Tweetie, created the pull-to-refresh gesture; and the widely used TweetDeck started out as a third-party platform for managing multiple accounts and posting content. Similarly, Facebook had a significant cycle of innovation when it opened up access, allowing applications such as Zynga, Buzzfeed, Pinterest, and others to leverage Facebook’s social graph and information stream for distribution.
But when user growth approaches saturation, Web2 platforms tend to shift from collaboration to competition with their partners. Over time, entrepreneurs learn not to build on centralized platforms, limiting innovation.
In contrast, decentralized social networks assure users that access remains open and permissionless. With this assurance, they are more likely to attract smart founders and build a strong, positive-sum ecosystem.
Native Crypto Primitives
Crypto and DeSoc protocols are often (but not necessarily) related to each other due to their emphasis on decentralization. For example, profiles in social graph protocols CyberConnect and Lens are stored on the L1 blockchain, while Farcaster ID is issued on Ethereum.
This connection to native digital ownership creates a large design space, which is very different from existing social media platforms. Crypto can be used as a simple financial primitive to transfer value within the network. For example, Nostr integrated the Lightning network to enable low-cost Bitcoin tipping.
Crypto primitives can also enhance the quality of interactions. Spam and bots plague all social media platforms, but since most Crypto actions carry financial weight (even in the form of trivial gas fees), the history of Crypto addresses can serve as an effective filtering mechanism. Some early experiments include building higher-quality feeds or address-based NFT collection portal communities. Challenges and open questions in DeSoc
The problem of causality
The most obvious challenge facing any platform/network founder is stimulating the initial network effect. The value of a network increases as the number of people using it increases. Therefore, it is suggested that the value of the new network is small. For early users, attracting and retaining them is often the biggest hurdle due to the small value. Even after acquiring a niche community, scaling it to the mainstream market is very challenging.
This is particularly true today. In contrast to Twitter, which gained widespread popularity with little competition, today’s social media platforms must compete with existing platforms that have strong barriers to entry and a lot of capital. Since users have already built their social networks and status on existing platforms, it is not very feasible to rebuild social capital on an entirely new platform.
BitClout attempted to solve this problem by crawling and importing existing social graphs from Twitter into its platform. At launch, BitClout was pre-loaded with profiles of thousands of well-known Twitter users, including Elon Musk, Katy Perry, and Barack Obama. While this campaign served as an effective marketing strategy, the app lacked differentiation and an organic community, and failed to keep users engaged, leading to rapid user churn.
Still, like the recent rise of relatively new TikTok, starting from scratch is surmountable. Therefore, finding a real use case that truly provides utility and a differentiated experience will be key. Additionally, some DeSoc protocols may not aim to gain the largest market share, but instead choose to focus on serving audiences that value open source, control, or privacy over universal adoption, as Linux did.
Infrastructure and UX differences
Most DeSoc protocols use public and private keys to give users ownership. Examples include: Nostr, Farcaster, Lens, and CyberConnect. However, at least for now, setting up private keys is often more confusing than traditional login methods.
There are also challenges with using private keys. What happens if a user loses their private key? Some protocols, like Farcaster, have recovery processes, but they are complex. Other protocols, like Damus, have no recovery options. Without proper design to mitigate the impact of a private key compromise, users may need to completely rebuild their social graph. Self-custody will be a double-edged sword.
Other obstacles include the need for private key signatures and transaction fees for on-chain operations, which are significant downgrades in user experience compared to Web2 platforms. One can easily feel the difference between the easy onboarding experience of using something like TikTok and the stress of using any of the DeSoc apps we’ll cover below.
Over time, these issues will be resolved. Multi-party computation (MPC) and smart contract wallets can help set up social recovery and reduce gas costs. But for now, wallets, custody, and recovery are key barriers to user adoption.
Monetization - an open question
Since almost all existing social media platforms monetize through advertising spending, generating revenue through other means remains an open question.
The DeSoc protocol is experimenting with using minting fees (paying a one-time fee for a unique ID), subscription models (such as paying for unique usernames or permissioned relays), and commission models (taking a percentage of funds as they circulate on the platform) to generate revenue. While these business models make sense in theory, there is little evidence to date that they are practical at scale, with users preferring to get it for free.
Other open questions:
1. Wen token? Does the DeSoc protocol need a token for decentralized governance (such as ENS, Uniswap), or can it remain decentralized like Linux, Android without a token? 2. Should the developers of the DeSoc protocol see the equity/token class of the protocol rise? If they do, will this create bad incentives? If they don't, how can developers be fully motivated and provided with enough resources to build and expand a platform that can compete with existing Web2 platforms?
3. Accordingly, how should developers think about raising capital? Some try to maximize credible neutrality by rejecting outside capital. Others believe that without enough huge funds, they cannot fully compete with the dominant players in Web2.
Industry map and where we are in the adoption cycle
Occasionally, a decentralized social app will suddenly see a large number of user signups due to external controversy or hype. The Mastodon social network grew nearly 5x after Elon Musk fired thousands of employees, changed verification policies, and arbitrarily added/removed accounts. More recently, Damus suddenly gained a large number of Chinese users, making it a top 21 social app in China.
But users tend to churn and return to existing platforms very quickly. (To be fair, Damus was ordered to be removed from app stores by the Cyberspace Administration of China.)
Overall, the DeSoc protocol and applications can still be said to be in the innovator phase of the adoption curve.
On all metrics, DeSoc adoption is orders of magnitude lower than existing platforms. Total active users on Mastodon and Damus (two relatively popular DeSoc platforms) are still just a fraction of Twitter's monthly active users (MAU). No DeSoc network is a clear winner - teams are still experimenting with the right architecture to provide a good user experience while remaining decentralized.
Below we will focus on the analysis through sample projects. We mainly focus on the high-level design of the protocols, weigh their advantages and challenges, and provide some comments based on our analysis. We will not go deep into the technical implementation of each protocol within the scope of this report.
Lens — Own your digital roots
Lens Protocol, developed by the Aave team, is a smart contract social networking platform based on Polygon. Almost all important social interactions are recorded on-chain. Users' profiles and followers are represented by NFTs. Mirroring and collections (similar to retweets and favorites) are also on-chain operations that create NFTs. The content itself is stored off-chain to save gas costs and only becomes an NFT when it is collected. The platform is designed to be modular, allowing developers to create new features through modules.
Similar to Farcaster, Lens aims to be a neutral base layer and encourage competition at the application/client level.
Lens received external capital from FTX Ventures last year.
Advantage:
Lens offers unique and innovative features through Crypto technology. For example, the Collect module allows creators to sell their posts directly to followers. Artists can create "rare collectibles" that allow followers to collect their artwork for a limited time. Followers can also mirror these posts and earn referral fees. Since all these operations happen on the blockchain, balances are debited and credited instantly, without a middleman.
Unlike Farcaster, Lens can “hitch a ride” on other nodes that have already validated the Polygon blockchain. Therefore, Lens is as decentralized and permissionless as the Polygon network itself.
Modular architecture allows others to create new social infrastructure.
challenge:
Since many user actions are read/write operations on Polygon smart contracts, latency and throughput can become issues, especially when the blockchain is experiencing high usage or network instability.
Unclear GTM: Current users appear to be made up of Crypto natives, creators, developers, and people who are effectively airdrop farmers. As a result, the overlap of common interests may be small, which could reduce user engagement. This is supported by the relatively low DAU/MAU ratio.
Spam, mostly from Sybils and airdrop farmers, makes it difficult to parse signal and noise.
· Reportedly, posts are unlikely to gain traction unless one of the Lens team members mirrors/reshares the post.
Other highlights: · Use third-party protocol XMTP to build secure, Crypto channels for direct messages, and Lit protocol to create gated publications.
Our take: Lens is one of the most innovative and exciting DeSoc protocols. It offers features and tools not seen on Web2 or other Web3 platforms, demonstrating what Crypto-enabled social networks can unlock for creators and fans. Ideally, these features will kickstart a powerful flywheel where creators start using Lens to build more direct relationships with their fans, attracting users to the platform, attracting more creators, etc. We also like Lens’ modular architecture, creating a broad design space for new social fundamentals.
Admittedly, the platform still has room for improvement. Popular apps built on Lens lack a refined user experience, and we have some concerns about Lens’ scalability given its current architecture. But these issues can be addressed over time. We look forward to seeing the apps that third-party developers build on Lens.
Conclusion
Decentralized social protocols and platforms face a daunting challenge in their pursuit of mainstream adoption. Behind the success of founders are thousands of similar failed attempts. However, we remain hopeful. Decentralized social networks have a unique opportunity to introduce entirely new social primitives and return the value of the social graph to users.
