Web3 Social Landscape

Introduction

At Pantera, we are excited about how web3 is unlocking new approaches for social platforms that enable users to connect and interact with creators, influencers, and fellow users. Last month, decentralized social protocol Farcaster saw a surge in popularity following its introduction of Frames, a feature that allowed developers to create interactive, embeddable posts for their audience. Soon enough, users were minting NFTs, claiming rewards for completing surveys, playing Doom, and even buying Girl Scout cookies directly through Warpcast, Farcaster’s flagship client.?

Such seamless in-app experiences were previously impossible through traditional web2 social media platforms. Identity, ownership, tokens, and payment rails-these are all features of the blockchain that have enabled the creation of new social features such as Frames. In this article, we’ll look at distinct social protocols and platforms, with a focus on how they use web3’s building blocks to build new experiences.?

Farcaster and Lens

In web2, data is siloed and controlled by the platform itself. This means developers cannot create alternative platforms that present content in new ways. X (Formerly Twitter) limits users to their platform, offering no flexibility for an interface that utilizes a different algorithm. Furthermore, users do not own their account-if they get banned, they lose their audience reach and ability to make posts to that account.

Farcaster and Lens, two popular social protocols, adopt a unique approach: they make data openly available and give users control of their accounts. Farcaster stores its post data on a decentralized storage network known as Hubs, so it is accessible to all. Moreover, Farcaster profiles are linked to users’ Ethereum accounts on the Optimism platform, ensuring users truly own their digital identity.

Lens is an on-chain social graph and developer tooling that enables users to own their content. Interactions on Lens can either be published on-chain or to Momoka, a data availability and verification layer. Creating a profile on Lens grants users a unique, sequentially-numbered NFT. This NFT serves as the access point to the protocol where users can perform actions such as follow, post, and comment. Since users own their NFT, they own their profile.

Developers are leveraging these open protocols to build a variety of engaging clients and features. Users publish content at the protocol level, and the same content can be accessed by one of many clients. While Warpcast serves as Farcaster’s flagship social media client, offering a user experience similar to X, and Phaver and Orb provide a popular experience on Lens, there are many further clients. There is Supercast, a client geared towards more serious and active Farcaster users; Sealcaster, which allows you to make anonymous Farcaster posts with zk-proofs; and Tape, a client geared for media sharing on Lens.

The innovation sparked by these open protocols are not just limited to client applications. Protocols like Farcaster and Lens stand apart from web2 by having features like on-chain identity, payments, tokenization, and composability that combine to enable novel innovations. On Farcaster, for instance, new experiments like DEGEN-a tradable token that users can employ to tip others via commenting on posts-are emerging. Additionally, there is a visible expansion of tools and services. Bountycaster, compatible with any Farcaster client, allows users to create and complete tasks for USDC rewards. Lens open actions feature, which enables custom on-chain actions to be embedded in a publication, enables new functionality in a social feed such as payments (collect fee, tipping), NFT minting, token issuance, and more. Whether it be tokenized games that are embedded directly in-app, prediction markets that keep score by updating one’s on-chain social reputation, or tools to make it easier to aggregate Farcaster and Lens data, there are countless experiments, applications, infrastructure, and tools waiting to be created.

Friend.Tech

In September of last year, web3 social application Friend.Tech took the crypto community by storm. Within a few months, the platform saw more than 100,000 accounts created. The app introduced a novel feature allowing users to purchase “keys” of influencers, unlocking exclusive privileges like direct message access and entry to gated chats. Influential figures, including gaming influencer FaZe Banks and NBA star Grayson Allen, joined the platform, sharing their thoughts on gaming, crypto, and sports with keyholders.?

What made the app so exciting for keyholders was the ability to trade keys, turning them into a form of investment in future demand for the influencer. Through friend.tech, users engaged in buying and selling keys, with a portion of the proceeds going to the influencers and platform itself. Many of the top crypto influencers, who would share alpha and thoughts on the crypto market, began earning hundreds of thousands of dollars through royalties. Within just 2 months, friend.tech generated nearly $20 million in fees.

Activity on the platform has significantly dropped since its peak due to retention issues, with the trading volume having decreased more than 99% since its height. However, friend.tech has demonstrated powerful characteristics for web3 social platform adoption:

1. Progressive Web Apps (PWAs): A pivotal factor in friend.tech’s rapid growth to over 100,000 users was its Progressive Web Apps. This technology allows users to sign in not through a complex wallet setup, but with familiar methods like Google, Apple, or SMS verification. This significantly simplifies the onboarding process for the average user, making it much more accessible.

2. Leveraging A Web2 Audience: friend.tech onboarded users by leveraging web2’s existing user-base. By getting users to connect through their X (formerly Twitter) accounts, friend.tech fostered constant conversation about its platform on X, driving even more X users to sign up.

3. Tradable Social Assets: friend.tech introduced a dynamic market for social assets, where users could trade keys, facilitated by low transaction costs on its Layer 2, Base. As we also saw with the success of BitClout in 2021, mixing financialization and speculation with social applications has the potential to create viral effects.

Focus

Recently, Pantera portfolio company DeSo announced their plans to launch Focus, its premier application built on the DeSo blockchain, in June of this year. Focus allows users to pay for content using crypto while enabling crypto-native subscriptions, paid messages, and paid reposts. Focus also integrates novel speculation-based primitives like tokenized creator revenue via a new product called "Creator Coins."

Addressing the cold start problem-how to attract enough users to make a social network valuable-is a significant challenge in developing social platforms. Protocols like Farcaster and Lens have tackled this issue by offering innovative experiences that draw users with the promise of unique interactions. Friend.tech strategically targeted the onboarding of crypto influencers, leveraging their following to bring a crypto-savvy user base to their platform.

Focus is attempting to address the cold start problem by using web3 incentives to onboard users. Users with high value followings on networks like X, Instagram, TikTok, or Twitch will be incentivised to sign-up and participate on the platform, since they will receive FOCUS token rewards in direct proportion to their measured influence. The team calls this novel mechanism a “Social Airdrop.”

Another necessity for a social network’s success is retention: users need to stick around. The team at DeSo has built out a Post-To-Earn mechanism to solve this: Focus will distribute tokens to top creators weekly who also engage with content frequently. Because users' accounts are connected to their on-chain wallet address, Focus is able to look at the user's activity and wallet balance to differentiate between true users and farming bots.

Even without incentives, why could creators continue using Focus versus other platforms? Focus introduces innovative new monetization methods for creators, made possible by the blockchain. First, Focus allows users to pay and be paid in crypto with subscriptions, paid messages, and a new primitive called "pay to repost," which essentially acts as a decentralized advertising model on the platform. Secondly, because all content data is stored on the DeSo chain, users can generate new content using Focus’ generative AI tools that allow remixing of a creator’s previous images, with creators setting fees for each user query of their work. Lastly, through Tokenized Creator Revenue, emerging creators will be able to issue and sell “creator coins” that earn a percentage of their content revenue, enabling early supporters to invest in and benefit from the creator’s growing success.?

Conclusion

Today, with Layer 1s and Layer 2s enabling activity without high fees and novel approaches to handling storage of data, we are seeing the emergence of social platforms across the web3 landscape. We have now seen the various approaches to how social platforms can leverage blockchain. Here are the important takeaways:

1. Using open-protocols to bring developers to generate novel use-cases is incredibly powerful. Farcaster and Lens are not the next Facebook-rather, these are protocols that will enable clients and applications that will onboard the next tens of millions of users. As even more data is generated and flows freely between platforms, these networks will thrive together.?

1. We have also seen how combining elements of speculation like friend.tech’s keys can create virality. With the advent of PWAs and Layer 2 solutions that enable cheap fees, onboarding users to killer web3 social applications will become much easier. Soon, users will be able to transact seamlessly just like they might in a video game.

1. Crypto introduces new ways for creators to monetize. Whether it is Focus’ Paid Reposts and Paid DMs, or friend.tech’s key royalties, crypto dissolves any payment friction so creators can expand past garnering for the most amount of views. Thus, they can find the approach that works best for them to earn.

1. There is a lot of promise in utilizing crypto incentives to solve the cold start problem for a network. In the past, Blur eventually overtook OpenSea in volume by introducing its airdrop seasons. Traders who did the most volume would receive more BLUR tokens. With Focus’ approach to using crypto incentives to target web2 platforms, we could see the platforms that utilize this strategy to onboard the most influential creators and influencers on X, YouTube, and Instagram.

In the coming years, social applications and networks that not only connect users, but utilize elements of crypto’s foundational building blocks such as open data, tokenization, ownership, identity will bring the next millions of users into crypto. At Pantera, we are looking forward to accelerating this future of web3 social.

- Paul Veradittakit