Exploring the Future of Web3 Social: How Token Incentives Create a Digital Economic Ecosystem

This article is the third in a series on decentralized social media, exploring how current technologies and trends address a range of issues related to decentralized social networks.

In 2017, researchers at the MIT Media Lab presented three major challenges facing decentralized social networks in an article:

1. Attracting and retaining users from scratch
2. Handling User Personal Information
3. User-facing advertising issues

They believe that the economies of scale of existing tech giants make it difficult for emerging competitors to establish themselves. However, over time, these "impossible" challenges seem to become surmountable. This series of articles explores how new ideas in decentralized social (DeSo) address these issues:

1. Use open social graph layers to solve cold start problems
2. Use personal identification and cryptographic techniques to solve user identity issues
3. Utilize token economic models and incentive mechanisms to address income issues

This article will focus on the third point, which is how to address income issues through Token economic models and incentive mechanisms.

Create "Killer Application"

The key to the success of Web3 social lies in whether it can produce a new "killer application" that offers a truly novel social experience to attract a large number of users. However, this "new social experience" is almost unpredictable. This article will explore two high-level strategies:

1. Enhance the existing social experience by adding Web3 features.
2. Create a Web3-first social community

Enhance Existing Social Experiences through Tokenization

Adding Web3 features to mainstream social platforms is a simple way, with the most common form being the addition of "extra Web3 features" through tokenization.

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

The tokenomics strategy of Reddit Moons is appreciated by the community, with a monthly issuance decrease of 2.5%, bringing the annual inflation rate close to 1%. In the long term, this may increase the scarcity and value of Moons.

Reddit is a particularly interesting case as it integrates Web3 features into an existing "killer app." Reddit's "subreddit" structure makes it a suitable platform for trying out Web3 mechanisms. In addition to Moons, Reddit has also launched a community points program that allows subreddits to issue their own ERC-20 Tokens.

However, whether the simple "post to earn" mechanism can succeed in the long term remains in question. Data shows that most users have relatively low incomes, revealing a fundamental issue with the X-to-Earn model: actual earnings are often far lower than the advertised "life-changing money."

Therefore, overemphasizing "making money" may not be sustainable. Instead, new and novel social experiences should be created for users, making them willing to pay for it. The friend.tech project on the Base network highlights this point. 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 volume of transactions in a short period. However, there are concerns about whether friend.tech can maintain its early momentum, including issues such as the absence of documentation regarding privacy policies and data collection practices, as well as the lack of a roadmap or whitepaper. Nevertheless, friend.tech remains an interesting experiment in transforming tokenization into a new form of social experience.

Build the First Social Community in Web3

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

Phaver is a typical example of a "first Web3" social community. It is built on the social graph of Lens and attracts the Web3 native community through integration with other Web3 social identity technologies. Phaver employs a unique dual-token model, utilizing a scoring system composed of "reputation" and "points," allowing users to earn rewards and privileges through upgrades.

Phaver's "reputation" system provides an effective way to distinguish between users and bots, and can be seen as a form of social identity "proof of stake". However, the main challenge Phaver faces is how to expand its audience and attract users without Web3 experience, while giving them a clear reason to use the platform.

POAP is another noteworthy project that originates from the unique "conference culture" in the crypto space. POAP is an NFT that serves as proof of a user's participation in events or conferences. It can act as a social artifact to kickstart social networks and find people with similar interests. However, the key issue is how to maintain the practicality of POAP to create new forms of digital social experiences.

Conclusion

The long-term success of Web3 social must create new forms of social experiences, rather than merely replicating Web2 mechanisms and tokenizing them. There needs to be a new experience inspired by Web3 and rooted in its culture, such as NFT communities, asset tokenization, or crypto conference culture.

To reach a broader audience, Web3 social must have easy-to-understand use cases instead of being filled with Web3 terminology and concepts. It needs to leverage the distribution and abstraction techniques of traditional social media to "go viral".

Successful Web3 social media needs to have an open design space that provides users with enough "blank canvas" to create their own use cases. Only when Web3 adopts this design decision, instead of focusing on financialization and on-chain imitation, can we truly begin to build a brand new "killer app" that expands Web3 social into a mainstream social platform.