A Detailed Discussion on the Advantages and Challenges of Decentralized Social Protocols

Original link: 《Rebuilding Connections Overview of Decentralized Social Networks Author: STEVEN SHI

Compiled by: Kxp, Blockbeats

Earlier this year, Twitter suddenly shut down third-party applications. A few weeks later, it canceled free API access, with its cheapest plan now costing $42,000 per month.

Now, most users have adapted to this reality. Our most important social media applications, from Facebook and TikTok to WeChat and Grab, are centralized platforms. Although these platforms are often 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' status.

These platforms are crucial to our daily lives. Therefore, users feel frustrated with the status quo but have little choice. As a result, decentralized social media is a key focus in the Web3 movement. Since the Crypto industry operates on Twitter, building a "decentralized Twitter" is particularly appealing to Web3 founders, as they are acutely 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 inception, Twitter has gone through 19 rounds of financing, raising $4.4 billion in capital. By the time it went public, it had accumulated nearly $1 billion in losses. However, over the past five years, the product itself has changed little.

Nevertheless, Twitter remains highly valuable, with a valuation of at least several billion dollars. If auctioned today, there would undoubtedly be many buyers willing to bid generously on Twitter's revenue.

The key value of Twitter and any social media platform primarily lies in its social graph. Features are commodities (see: Clubhouse's spaces, Snapchat's stories, TikTok/Douyin's short videos). However, unique and differentiated social graphs are highly valuable, which is why niche platforms can grow and maintain market share in fierce competition (e.g., Bilibili, GitHub, LinkedIn, Twitch). In contrast, weak social graphs can frustrate users and lead to a death spiral (e.g., Clubhouse, MySpace, Friendster, Vine, Renren, YY, Digg).

Existing platforms have long recognized this and captured value by locking in users. As a result, most users are constrained by existing platforms, with almost no viable exit options.

Decentralized social networks promise to return the value derived from social graphs to users. The overall argument suggests that this approach eliminates rent-seeking behavior and promotes more competition for products and features, ultimately creating value for users.

The Promise of Decentralized Social Networks

Anti-Censorship and Ownership

One of the most obvious benefits of building DeSoc protocols is guaranteeing open access. Decentralized social networks should allow two users to find each other and communicate, even if all other users want to block that communication. These networks should also allow users to publish content and find what they want.

This is not to say that centralized filters cannot be applied to them. We can draw parallels between Gmail and decentralized email protocols (SMTP, POP3, IMAP) to imagine what a powerful decentralized social network might look like. Although Gmail is a centralized application, users can choose other clients or own their domain names, thus gaining more control over data, privacy, and communication preferences. The switching costs are negligible.

Most DeSoc protocols have a similar architecture. Therefore, users truly own their social graphs and can freely exit any application.

Composability Drives Innovation

The open access of decentralized social protocols is likely to lead to faster and more significant innovation between applications built on them. This aligns with the previous point—if the cost of switching for users is low, applications must compete to provide the best user experience.

In fact, when Twitter's API was relatively open, it also experienced a similar cycle of innovation. Many Twitter inventions originated from external developers. Twitterrific created the Twitter bluebird logo and the term "tweet"; another third-party client, Tweetie, created the pull-to-refresh gesture; and the widely used TweetDeck initially emerged as a third-party platform for managing multiple accounts and publishing content. Similarly, when Facebook opened access, it also had significant innovation cycles, allowing applications like Zynga, Buzzfeed, and Pinterest to leverage Facebook's social graph and news feed for distribution.

However, as user growth approaches saturation, Web2 platforms often shift from collaboration to competition with their partners. Over time, entrepreneurs have learned not to build on centralized platforms, limiting innovation.

In contrast, decentralized social networks assure users that access remains open and permissionless. Under this guarantee, they are more likely to attract smart founders to build a robust, positive-sum ecosystem.

Native Crypto Primitives

Due to the emphasis on decentralization, Crypto and DeSoc protocols are often (but not necessarily) interconnected. For example, social graph protocols CyberConnect and Lens store profiles on L1 blockchains, while Farcaster IDs are issued on Ethereum.

Unlike existing social media platforms, this connection to native digital ownership creates a significant design space. Crypto can serve as a simple financial primitive to transmit value within the network. For instance, Nostr integrates 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 operations carry financial weight (even in the form of negligible 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

Causality Dilemma

One of the most obvious challenges faced by any platform/network founder is stimulating initial network effects. The value of a network increases with the number of people using it. Therefore, this implies that the value of a new network is small. For early users, attracting and retaining them is often the biggest hurdle due to the low value. Even after gaining a niche community, scaling it to the mainstream market is very challenging.

This is particularly evident today. Compared to Twitter's widespread adoption with almost no competition, today's social media platforms must compete with existing platforms that have strong barriers and substantial capital. Since users have already built their social networks and status on existing platforms, reconstructing social capital on an entirely new platform is not very feasible.

BitClout attempted to address this issue by scraping Twitter and importing existing social graphs onto its platform. At launch, BitClout preloaded 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 application lacked differentiation and organic community, failing to maintain user engagement, leading to rapid user attrition.

Nevertheless, just like the relatively recent rise of TikTok, starting from scratch can be overcome. Therefore, finding a practical use case that genuinely offers utility and a differentiated experience will be key. Additionally, some DeSoc protocols may not aim for maximum market share but choose to focus on serving audiences that value open-source, control, or privacy, similar to Linux.

Infrastructure and UX Discrepancies

Most DeSoc protocols use public and private keys to give users ownership. For example: 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 private key leakage, users may need to completely rebuild their social graphs. Self-hosting will be a double-edged sword.

Other barriers include on-chain operations requiring private key signatures and transaction fees, which are significant downgrades in user experience compared to Web2 platforms. People can easily feel the difference between the easy onboarding experience of using Douyin and the stress of using any DeSoc application we will introduce below.

Over time, these issues will be resolved. Multi-party computation (MPC) and smart contract wallets can help set up social recovery features and reduce gas costs. But for now, wallets, custody, and recovery features are key barriers to user adoption.

Monetization—An Open Question

Since almost all existing social media platforms monetize through advertising spend, generating revenue through other means remains an open question.

DeSoc protocols are attempting to earn revenue through minting fees (one-time fees for unique IDs), subscription models (such as paying for unique usernames or permissioned relays), and commission models (charging a percentage when funds circulate on the platform). While these business models make sense in theory, there is little evidence so far that they are practical at scale, as users tend to prefer free access.

Other Open Questions:

• When token? Do DeSoc protocols need tokens for decentralized governance (e.g., ENS, Uniswap), or can they remain decentralized like Linux and Android without tokens?

• Should developers of DeSoc protocols see the equity/token class of the protocol rise? If they do, will this create adverse incentives? If they do not, how can developers be adequately incentivized and provided with enough resources to build and scale a platform that can compete with existing Web2 platforms?

• Accordingly, how should developers consider raising capital? Some try to maximize credible neutrality by rejecting external capital. Others believe they cannot adequately compete with Web2 leaders without sufficient large funding.

Industry Map and Our Position in the Adoption Cycle

Occasionally, decentralized social applications will see a sudden influx of user registrations due to external controversies or hype. After Elon Musk fired thousands of employees, changed verification policies, and arbitrarily added/removed accounts, the Mastodon social network grew nearly fivefold. Recently, Damus suddenly gained a large number of Chinese users, making it the 21st ranked app among all social applications in China.

However, users often churn very quickly and return to existing platforms. (To be fair, Damus was ordered by the Cyberspace Administration of China to be removed from app stores.)

Brief Hype Cycle

Overall, DeSoc protocols and applications can still be said to be in the innovator stage of the adoption curve.

On all metrics, the adoption rate of DeSoc is several orders of magnitude lower than existing platforms. The total active users on Mastodon and Damus (two relatively popular DeSoc platforms) are still just a small fraction of Twitter's monthly active users (MAU). No DeSoc network is an obvious winner—teams are still experimenting with the appropriate architecture to provide a good user experience while maintaining decentralization.

We will focus on a few more interesting projects below. We primarily focus on the high-level design of the protocols, measuring their strengths and challenges, and providing some commentary based on our analysis. We will not delve into the technical implementations of each protocol within the scope of this report.

Mastodon—Entering the Fediverse

Mastodon has emerged as an alternative to Twitter, especially following recent controversies.

Mastodon is built on instances of independently hosted servers. Each instance is managed by its own administrator, who sets the rules and policies for their specific community. Administrators can ban, censor, or encourage content according to their preferences, although many servers we visited strive for neutrality. Thus, Mastodon encourages users to choose the instance that best aligns with their values and preferences or to self-host an instance.

Mastodon uses ActivityPub, a standardized open-source protocol for social networks. It is part of the Fediverse, a term used for all platforms that can communicate with each other using the ActivityPub protocol.

Mastodon's development is collectively funded through Patreon and OpenCollective, with no VC involvement.

Advantages:

• All the advantages of DeSoc platforms—open source, ownership and control of data and social graphs, and the ability to freely exit from one client to another.

• Using ActivityPub, an open and decentralized protocol for social networks, significantly enhances interoperability and decentralization.

• Emphasis on community: Many users appreciate Mastodon's community-driven nature, where smaller instances foster a more intimate and supportive environment.

Challenges:

• Instances are mostly operated by individuals or groups with fewer resources than Web2 leaders. Most servers are managed by volunteers who take on the responsibility of running their instances. This includes maintenance costs (e.g., licenses, hardware, electricity) and content management risks (e.g., undesirable/unwanted content, copyright infringement, extremist content, etc.). Servers may experience downtime, and search functionality is weaker compared to Web2 platforms. Inconsistent management across different servers can lead to frustrating experiences.

• While Twitter is like a "big pot stew," containing various interests, topics, and languages, Mastodon's server architecture tends to verticalize topics. This can lead to user group fragmentation, reducing use cases and decreasing opportunities for serendipitous discovery.

• High entry barrier: Twitter is already daunting for new users. Mastodon complicates the onboarding process further, requiring users to search for and follow users across different servers, which may increase user burden.

Other Points:

• Mastodon does not directly integrate features or technologies from Crypto/blockchain. Any such integration would be developed by third parties built on Mastodon.

• Different monetization methods: Some servers are entirely operated by volunteers and request donations to maintain the server, while others run ads.

Our View

Mastodon's philosophy and design goals are commendable. It offers users the choice to create, curate, and select their social network experience. Due to its open-source and community-driven development, it could become an important component of decentralized social media, existing in the long term.

However, several barriers may prevent it from reaching the mainstream. The fragmentation of user groups through server specialization will reduce its ability to achieve network effects and broader adoption. For example, while breaking news often spreads first on Twitter, it is hard to see similar occurrences happening on Mastodon. Additionally, the current poor user experience may explain the low user retention rates after the influx of new users from Twitter events.

Nevertheless, Mastodon is a strong alternative for users seeking intimate communities with shared interests. In the future, developers may continue to build on Mastodon, creating third-party applications with seamless navigation and improved user experiences.

Farcaster—A Protocol That Is Decentralized Enough

Farcaster is a sufficiently decentralized social network built on Ethereum. The Farcaster team coined the term "sufficiently decentralized," which means that even if the entire network wants to prevent two users from finding each other and communicating, they can still find each other to communicate.

Although Farcaster leverages Ethereum in part of its tech stack, it does not host the entire social network on the blockchain. Instead, Farcaster IDs are registered on Ethereum, while its social graph and content are hosted on a network of nodes called Hubs. These Hubs ensure the consistency of the network by replicating all data and signed messages. The Farcaster protocol also prunes messages, making Hubs lightweight, which enhances the protocol's decentralization.

Farcaster Architecture

Farcaster drives competition at the application and client levels. The team believes that excellent applications should evolve from this architecture. Since user distribution occurs at the protocol level, applications with killer features should theoretically be able to leverage the underlying distribution of the protocol to gain market share. This is similar to how Clubhouse leveraged the social graph of Twitter/Instagram users at launch.

Farcaster is currently invite-only, with a total user count of about 11,000. The Farcaster protocol is developed by Merkle Manufactory, which raised $30 million last summer in a funding round led by a16z. Merkle Manufactory is also building a mobile/desktop client called Warpcast on top of Farcaster.

Advantages:

• The protocol and the first client application developed by Merkle can test and release new features at a speed comparable to Web2 competitors. In recent months, Warpcast has achieved significant improvements, including launching a desktop client, QR login, and a mobile app in the app store.

• Even in its early stages, Warpcast's onboarding experience is very familiar to Twitter users.

• Thoughtful design for trusted ID and account recovery

--ID: While the primary namespace is fully decentralized, a second namespace can be managed. Therefore, if you register on Farcaster, no one can take your unique ID (e.g., @918392) from you, but if you falsely register the handle @jeffbezos, the second namespace can choose to take it away.

--Recovery: Built-in recovery system in case of private key loss/attack, with a 7-day time window to prevent malicious account takeover.

• Since Farcaster IDs exist on Ethereum L1, it is easier to integrate other Crypto elements into the client. For example, Warpcast incorporates NFT verification and discoverability into its client.

Discovering NFTs on Warpcast

Challenges:

• Merkle must prove its credible neutrality over time, as both the protocol and the de facto client have been developed by a centralized team. VC support may hinder claims of credible neutrality.

• Accordingly, due to Merkle's first-mover advantage and being the first to understand new protocol developments, its default client may crowd out third-party clients.

Other Points:

• Monetization may occur by charging fees for unique Farcaster names (e.g., @elonmusk), although this has not yet been implemented or confirmed.

• GTM seems to be curating a Western-oriented tech community, including individuals involved in Web2, Web3, VC, etc.

Our View:

Farcaster's currently more centralized structure allows it to respond better to user feedback, iterate quickly, and achieve product-market fit. Its architecture is well-designed and should scale easily to accommodate millions of users. Additionally, Merkle's VC support provides financial and network resources for Farcaster's growth.

We are optimistic about the team's ability to expand the user base beyond the current group. The initial market strategy targeting tech enthusiasts is smart, as these users are often early adopters of new platforms and more likely to contribute to open-source protocols. There is already a vibrant developer community with various applications leveraging Farcaster's social graph. Similar dynamics to those created by Instagram and Vine for Twitter Feed a decade ago could play a similar role in Farcaster's ecosystem.

We primarily focus on how Farcaster gradually decentralizes over time. This can only be resolved with time, as the Farcaster team demonstrates they can slowly let go, making it easier for developers to run Hubs and allowing third-party developers to compete with Warpcast on an equal footing.

Lens—Own Your Digital Roots

Lens Protocol, developed by the Aave team, is a smart contract social network platform based on Polygon. Almost all significant social interactions are recorded on-chain. Users' profiles and followers are represented by NFTs. Mirrors 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, only becoming NFTs when collected. The platform's design is modular, allowing developers to create new features through modules.

Similar to Farcaster, Lens aims to be a neutral foundational layer and encourages competition at the application/client layer.

Lens received external capital from FTX Ventures last year.

Advantages:

• 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," allowing followers to collect their artwork within a limited time. Followers can also mirror these posts and earn referral fees. Since all these operations occur on the blockchain, balances are immediately debited and credited without intermediaries.

• Unlike Farcaster, Lens can "ride on the coattails" of other already validated Polygon blockchain nodes. Therefore, Lens is as decentralized and permissionless as the Polygon network itself.

• The modular architecture allows others to create new social primitives.

Example of creators monetizing artwork using the Collect module

Challenges:

• Since many user operations are read/write operations on Polygon smart contracts, latency and throughput may become issues, especially when the blockchain is experiencing high usage or network instability.

• Unclear GTM: Current users seem to consist of Crypto natives, creators, developers, and essentially airdrop farmers. Therefore, the overlap of common interests may be small, potentially reducing user engagement. This is supported by the relatively low DAU/MAU ratio.

• Spam, primarily from Sybil and airdrop farmers, makes it difficult to parse signals from noise.

• Reports suggest that posts are unlikely to gain attention unless one of the Lens team members mirrors/re-shares them.

Other Points:

• Building secure, Crypto channels for direct messaging using the third-party protocol XMTP and creating gated publications using the Lit protocol.

Our View:

Lens is one of the most innovative and exciting DeSoc protocols. It offers features and tools not seen on Web2 or other Web3 platforms, showcasing what Crypto-enabled social networks can unlock for creators and fans. Ideally, these features will kickstart a powerful flywheel, enabling creators to establish more direct relationships with their fans using Lens, attracting users to the platform, and drawing in more creators, etc. We also appreciate Lens's modular architecture, which creates vast design space for new social primitives.

Admittedly, the platform still has room for improvement. Popular applications built on Lens lack refined user experiences, and we have some concerns about Lens's scalability given its current architecture. However, these issues can be gradually addressed. We look forward to seeing what third-party developers build on Lens.

CyberConnect—Scalable and Context-Rich Social Graphs

On the surface, CyberConnect is very similar to Lens Protocol. Both are decentralized social networks leveraging smart contracts on broad blockchains. Like Lens, CyberConnect issues NFTs for profiles, followers, and content. Creators can monetize through NFTs or token-gated portions of the community. Similarly, both have modular architectures that allow developers to create and reuse modules according to their needs.

However, CyberConnect uses a combination of multiple blockchains and distributed networks, including Ethereum, Polygon, BNB Chain, IPFS, and Arweave. CyberConnect also caches and batches user operations, then uploads them to decentralized storage like Arweave to enhance scalability while maintaining data integrity and censorship resistance.

CyberConnect distinguishes itself through its initial and diverse use cases and social graph curation. Other protocols like Farcaster and Lens often have their first use case as "decentralized Twitter." In contrast, CyberConnect offers a variety of other products and features:

• ccProfile: On-chain identity standard for individuals/collectives, including on-chain operations.

• Link3: Similar to Linktree and Eventbrite, Link3 helps Web3 users find other profiles and discover/participate in events, leveraging ccProfiles and CyberConnect's social graph.

• W3ST (Web3 Status Token): A more general proof of attendance concept covering endorsements, roles, certificates, and participation.

• FanClub: A loyalty and community game that identifies and rewards users for their contributions to companies and DAOs, similar to Galxe and Crew3.

• Posts: Publishing tools similar to Mirror.xyz (decentralized Substack), permanently storing content on-chain and allowing fans to collect posts.

CyberConnect also has a thriving dApps ecosystem covering various use cases beyond Twitter functionality. Its recent hackathon "#Connected2023" particularly enhanced its ecosystem.

Selecting projects in CyberConnect's ecosystem

CyberConnect raised $15 million in Series A funding in May 2022, co-led by Animoca Brands and Sky9 Capital [Disclaimer: Amber Group also participated in CyberConnect's Series A funding].

Advantages:

• Seamless user experience without the need to sign minimal private keys.

• Multi-chain support and proprietary data indexers enhance scalability, flexibility, and social graph connections. According to our conversations with other developers, this also improves the developer experience.

• The social graph may be richer, including individuals, collectives, events, and various on-chain interactions.

• Various products aimed at Web2 users: Link3 <-> LinkTree, Posts <-> Substack, Events <-> Eventbrite, Phaver <-> Twitter, Huddle01 <-> Zoom, etc.

• Modular architecture allows others to create new social primitives.

Challenges:

• CyberConnect uses centralized relays to enhance scalability. Although plans have not yet been announced, decentralization may occur in the future.

• Some early features of CyberConnect (such as events, status tokens, FanClub) belong to lower engagement products.

• Similar to Lens, it is difficult to parse signals from noise due to a majority of spam activities like Sybil and airdrop farming.

Other Points:

• Due to the initial GTM focusing on use cases like events and FanClubs, as well as other use cases beyond Twitter, the average quality of CyberConnect's social graph differs from that of Farcaster or Lens.

• By leveraging more use cases beyond just targeting the Crypto-native community, CyberConnect also hopes to attract more mainstream users into Web3.

• Strong B2B onboarding that pairs well with numerous Web3 organizations, with many Link3 profiles.

• Since February of this year, it has generated 278E and 401BNB (approximately $603,000) from profile minting fees.

Our View

CyberConnect excels at building distinctly different social graphs and providing a wide range of applications commonly found in Web2. Its initial GTM targeting Crypto-native and adjacent communities helps enhance immediate adoption rates. It has the potential to become a one-stop shop for decentralized social media and content in the Crypto industry, replacing Web2 tools like Linktree, Medium, Eventbrite, and others used by Crypto users/companies today.

However, the effectiveness of all experiments with different use cases remains to be seen. If decentralized social platforms are to achieve strong adoption rates and high engagement, there needs to be a killer feature driving growth.

Nevertheless, the CyberConnect team continues to deliver stylish and innovative products. We look forward to what the team and other developers will build on top of the protocol.

Conclusion

Decentralized social protocols and platforms face daunting challenges in pursuing 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 social graphs to users.

Social media is on the brink of transformation. While we are still in the early stages, the possibilities for reshaping how we connect, share, and interact online are truly limitless, opening the door to a brighter, more inclusive, and empowering digital landscape.