SocialFi in Web 3: Socializing has no end

Author: Jayde Zhang, jaydezhang0901@gmail.com

Social interaction, fully known as social communication, is defined in writing as "the social activity of individuals interacting with each other, engaging in material and spiritual exchanges." In social interaction, people share their views, emotions, and experiences.

Humans are social animals. As a prominent figure in Web2 social networking, WeChat's father Zhang Xiaolong believes that the essence of social interaction is to find like-minded individuals. Zhihu's founder Zhou Yuan suggests that the essence of social interaction may revolve around answering two questions—Who am I and who are others?

The "self" is a complex philosophical concept, but social interaction is a universal need. People desire social connections with others, stemming from three main reasons: the exchange of value (economic value, social value); the fulfillment of emotional needs; and the acquisition of sexual resources. During social interactions, behaviors also lead to information exchange and the formation of social networks.

As a business centered around "people," the value of the social networking market, worth hundreds of billions, has always been a focal point for entrepreneurs. Web2 social networking often equates to one or more social applications. However, it is evident that the Matthew effect of super social apps is becoming increasingly pronounced, with WeChat seemingly turning into a black hole for all social products.

On the other hand, as the benefits of the mobile internet peak, the business imagination of major internet companies has been repeatedly compressed. Overall, Web2 social products exhibit fatigue and a lack of innovation; since the emergence of Clubhouse in 2021, no exciting mainstream, global phenomenon has emerged in the market.

Opportunities arise from crises. Issues such as meager earnings for Web2 creators, vicious competition, and platform monopolies are forcing the rise of the SocialFi sector. With the paradigm shift from Web2 to Web3, in the Web3 SocialFi sector, a group of vibrant entrepreneurs is flourishing based on blockchain infrastructure.

The "SocialFi Entrepreneurs" series has specifically found three representative and outstanding practitioners in the SocialFi sector to share their career stories, industry insights, and future visions. We hope to use their stories as nodes, inspirations, and sparks to illuminate each other in this enchanting primitive forest of Web3.

1: Louis Lu: Building a Web3 Digital Identity Platform, Witnessing the Paradigm Shift from "Platform-Centric" to "User-Centric" Social Interaction.

------BOOM CTO ｜ Twitter @boomapporg

After working in Web2 for 6 years, I decided to go all in on Web3.

During my student years, I was fortunate to be involved in Bitcoin mining and trading, and I also developed a basketball community app as an entrepreneur. After graduation, I worked in data mining at Baidu and ByteDance, focusing on user behavior mining, information flow recommendation, and advertising optimization. Thanks to my extensive data-related work in Web2's search, recommendation, and advertising fields, I have a deep understanding of the issues with Web2 social products. Web2 social products are highly centralized and have many drawbacks regarding user data.

• Data Ownership Issues: Centralized platforms in Web2 treat user data and creator content as their core "data assets" and "data barriers"; however, users have almost no control or management rights over their data. For example, if Facebook or Twitter bans your account, you not only lose your content and followers but also likely have no avenue for appeal. This creates significant insecurity for users.

• Data Privacy Issues: Data is stored in the company's centralized database, managed by centralized platforms, which may pose a risk of data breaches. It is worth mentioning that various social platforms often collect user data without users' knowledge.

• Data Revenue Rights Issues: For instance, one of the main monetization methods on the internet is advertising, where platforms primarily rely on creator content traffic and user data to generate advertising revenue, but only a small portion of this revenue flows to creators and users.

Joining Web3 is partly due to the fact that after nearly 20 years of Web2's development, the industry has become highly centralized, with business growth peaking and policy benefits dwindling, necessitating the exploration of the next opportunity. On the other hand, some of my friends from school who played with crypto have chosen to stay in Web3, achieving significant success during the rapid development of Web3 in recent years. Moreover, my Web2 friends have also gradually joined the Web3 industry. When an emerging industry attracts more and more venture capital and talent, I sensed that there would be great opportunities in the future, so I decided to leave Web2 and dive into Web3.

Doing the difficult yet right thing, witnessing the paradigm shift from "Platform-Centric" to "User-Centric" social interaction.

With the development of DeFi, GameFi, and NFTs, Web3 has seen a continuous expansion in user scale and industry influence, making social interaction an inevitable component. However, existing Web2 social products are highly centralized and cannot meet the new demands of Web3 users regarding data ownership, revenue rights, and privacy, necessitating a new paradigm for social networks.

Boom's goal is to build the next generation of social networks based on blockchain technology. I am primarily responsible for technical architecture design and product development at Boom. Currently, we are focusing on developing a Web3 digital identity label protocol. User identity is the core of social products, and with the emergence of social graphs and soul-bound tokens (SBT), it has become a consensus that Web3 needs a better DID (Digital Identity).

Web3's decentralized technology based on blockchain allows for the decentralization and composability of user-generated content, social relationship data, identity reputation, etc., without the need for a centralized platform. These changes will provide new paradigm solutions to issues of data ownership, revenue rights, and privacy for users, creating a social network that places greater emphasis on users.

Users come for the tools, but stay for the relationship networks.

Looking at the current development model of social products, successful Web2 social products can provide users with actual utility and entertainment, which users can clearly perceive. For example, Facebook, Twitter, and TikTok allow you to connect with many people and understand their dynamics. Apps like WhatsApp or WeChat help you communicate and video chat with people around the world without incurring SMS fees, which is practical utility.

Social networks also follow Metcalfe's Law: The value of a social network is proportional to the square of the number of users. The more users there are, the greater the value of the social platform, and then the user growth curve will suddenly explode at a certain point.

However, users may question why do large social networks lose their original sense of value when user numbers surge? Why do some large social networks decline while some emerging small social networks rise? Why do small networks with excellent tool experiences attract many users but ultimately fail to retain them as social networks, while seemingly useless ones succeed?

For example, after Facebook, platform-level social products like Instagram and SnapChat emerged, and the once-popular TikTok posed a huge challenge to Facebook. Many young people now "play dead" on WeChat Moments but "party" on Douyin.

To explain this, the new social product model expands beyond utility and entertainment to a third dimension: social capital.

How can one acquire social capital and quickly accumulate an advantage in social capital?

This seems similar to capital acquisition in blockchain networks:

1. Each social network will issue a new form of social capital (e.g., follower count, likes), comparable to tokens in blockchain networks.

2. You must provide proof of work (POW) to earn tokens, corresponding to mining in blockchain.

On Facebook/WeChat Moments, you need to post entertaining statuses; on Instagram, you need to update interesting photos; on TikTok/Douyin, you need to post engaging short videos. This way, you can provide proof of work on social platforms to gain more attention and likes, accumulating social capital. Early users who join a social network for mining will also gain advantages in accumulating social capital.

Celebrities with inherent advantages in social capital joining new social platforms will also have a natural edge, similar to pre-mining tokens in blockchain networks. Like cryptocurrencies, value is related to scarcity, and the scarcity of social capital stems from proof of work (POW).

However, we must also recognize that social networks, like blockchain networks, have their own life cycles. Over time, mining tokens on each social network will become increasingly difficult, leading to a deflationary effect. Users will feel that they cannot derive value from old social networks and will gradually leave.

Persisting in the long term, building a user-centric social network primarily driven by young people.

Web3 social networks are still in their early stages. The tokenization of fan communities in 2021 and decentralized SocialFi were fleeting moments. However, decentralized social is gradually gaining traction, and the DAO of decentralized social and Web3 social infrastructure and protocols are continuously evolving. I believe that in the next cycle, more user-centric social networks will emerge.

Currently, Web3 social is mainly scattered within Web2 social networks. In the future, Web3 and Web2 social networks will not be completely separate and opposing; there will be intersections and integrations, but the specific forms are unpredictable.

Historical experience shows that young people will be the main force behind the next generation of social networks. They enter the scene later and find it challenging to compete with older users on old social products, but their advantage lies in their ability to spend time exploring new social networks and seeking attractive new social capital.

I have been working in the Web3 Social field for quite some time and have experienced a full cycle of SocialFi. From initially exploring social tokens for shared fan communities to now building decentralized social graphs and Web3 digital identities, we have made many attempts and accumulated considerable experience in combining Web3 technology with social products and user growth.

In the future, I will continue to research ZK technology, focusing on how to better address user identity management and privacy issues, which is an important complement of Web3 to Web2 social. User privacy is crucial for Web3 social products, but unfortunately, there has yet to be a particularly good application intersection.

Looking at the industry's current trend, the entire crypto industry is in a bear market phase. BOOM's product direction will focus on iterating infrastructure, starting with building a Web3 digital identity platform to empower the next cycle of social products.

2: Ryan Li: Laying the Infrastructure for the Upcoming Unified System of Social Relationships

------CyberConnect CTO｜Twitter @ryanli_me

Entering the social space for the third time, from simply bridging distances with friends to empowering industry content creators.

I studied undergraduate at UC Berkeley, and I attempted to start a social product venture right from the beginning of my studies. That was my first attempt, and I successfully secured funding from Tencent, aiming to focus on familiar social interactions. However, seven or eight years ago, I realized that sometimes having a great product is not enough because everyone was playing on SnapChat or WeChat. But after seven or eight years, I can clearly perceive that the product ecosystem has undergone many changes.

After graduating in 2017, I worked on a product called Lino, creating a decentralized autonomous video platform community based on blockchain technology. The initial intention was to help content creators monetize better and give creators more ownership of their data. At that time, this project was one of the first large-scale projects on Cosmos. By conveying positive feedback through content value, we aimed to allocate benefits to creators. Every content creator could be an owner of this platform.

Building on the Lino product, I and my team subsequently developed DLive, a game streaming platform. In 2019, PewDiePie, the world's largest gaming influencer, exclusively streamed on it. This product achieved around 1 million daily active users and 10 million monthly active users, marking a relatively successful entrepreneurial experience. In 2020, it was acquired by BitTorrent, where I served as CTO for a year and a half. In March of last year, I started my venture with CyberConnect.

Web3 has many exciting elements, such as DeFi and NFTs, which are quite interesting. I have also made some attempts but ultimately decided to focus on building social infrastructure.

My previous entrepreneurial experiences have given me a lot of understanding of content creators, especially regarding enabling creators to truly own their data. I hope to allow users, including content creators and ordinary users, to genuinely own their relational data, their social identities, and the content they create through a universal identity system for social login permissions. Then, I aim to provide a complete infrastructure system to developers, empowering them to rapidly complete the native development of social platform websites. This is similar to completing part of the foundational infrastructure for the next generation of Twitter or Facebook products.

My interest in social interaction stems from seeing social interaction as a process of content transmission and community formation. There are different types of social interactions, including those between acquaintances, strangers, and small group interactions. Social channels serve the purpose of content transmission, and the value of content and the distance of relationships have a subtle relative relationship. Initially, I aimed to improve acquaintance-based social interactions, wanting to bring me closer to my friends.

Gradually, especially after monetization strategies emerged, content creators became increasingly interested in cross-platform interactions. I hope to help everyone obtain the earnings they deserve from content creation and maximize their value.

Platform-centric social interactions confine social assets back to the dimension of person-to-person relationships.

In the context of Web3, not every content creator needs to have millions of followers. In fact, if a content creator serves a small portion of their fan base well, they can still live comfortably. This logic was not feasible before, but now many real opportunities have emerged, which is what I have been exploring.

My connection with the team has been long-term, and we have been exploring together for a long time. My co-founder Wilson and I initially explored monetization strategies for influencers. Later, we discovered that influencers were quite distant from their communities. We then shifted to building infrastructure, aiming to better reflect relationships. For instance, helping individuals build their social channels' infrastructure, I personally believe, will have more long-term value than merely focusing on KOL monetization or selling NFTs.

The entrepreneurial direction of user relationships is not something that can quickly become profitable. For example, if I want to bring my friends to a new product, I actually need to bring all their friends to the product as well.

Relationships are inherently complex. In the physical world, once people get to know each other, we can meet offline to hang out. This relationship exists between people. For example, if I make a new friend at a bar, we establish a friendship there. However, I won't necessarily return to the same bar every time I want to meet this friend. But in the online world, relationships exist on platforms. I am friends with you on WeChat, and I am friends with you on SnapChat; the relationship remains on WeChat and SnapChat. If I follow someone on Twitter and want to keep track of their updates, I need to return to the same place each time. This greatly hinders developers from innovating, because no matter how good the product is, if the user migration cost is too high, it is essentially meaningless.

In the early internet, there was no concept of users or native data ownership. Therefore, multiple platforms had to coexist. I focus on improving around specific applications, centered on users owning their data and relationships.

From one perspective, the utility of social interaction varies. Different scenarios create different relationship networks, and in different situations, the value of content transmitted through each information flow is also different. For example, on Douyin, users may browse more centralized PGC content. What we see on Instagram and WeChat is different.

In the future, I envision social relationships as a unified system. If relationships can be completely public and fully owned by individuals, what I aim to do is configure directly for developers in the context of individuals.

Future Goals: Make Unique Technical Contributions to Create Long-Term Value for the Industry.

For the product, I certainly hope to serve millions or even tens of millions of users. We provide excellent tools for products with social attributes, allowing everyone to create better experiences. We aim to help content creation monetize better and maintain and establish friendships more effectively. I approach this with a long-term perspective, hoping we can define the technology for the next generation of social applications.

I am currently working on a product called Link3, similar to LinkedIn for Web3. I define it as a verification identity network product, aiming to create a Web3 business card for Web3 practitioners or those genuinely concerned about the long-term success of Web3; a Web3 business card that allows them to establish trusted personal homepages. This is what I am working on in the short term.

In the long term, I hope to make my unique contribution in the Web3 field, creating long-term value for the entire industry. I want to provide developers with better tools and users with better products. The entire industry is still in its early stages, and most applications are still market-driven. The current market composition determines which applications will become mainstream.

Innovative products have yet to emerge, and new demands have not yet been created. Current products still focus on meeting some of the simplest human needs. As more users join Web3, there may be more diverse products born. Only with more applications in the ecosystem can users have better and newer experiences.

3: Luke Wang: Innovating the Construction of Social Permissions to Create Social Interaction in a More Novel and Exciting Way

------SwapChat CEO｜Twitter @Web3MQ

With a background in MIT Media Lab technology, I hope to ensure the creation of something different through technology.

I consider myself an old newcomer to Web3, having entered the field in 2015. At that time, Ethereum had just released its first version with EVM. The decentralized companies everyone admired were still called XRP, which is now forgotten.

However, at that time, my main focus was still on completing my studies. The core of the professors' classes was still centered on data science, machine learning, and natural language processing. On one hand, I had limited interest in these areas, and on the other hand, I yearned to make a tangible contribution to the world. I have tried various fields, including consumer sectors and health care, and I can be considered a veteran in Web2 entrepreneurship.

However, I had already seen the trend of the bubble bursting and was calculating that the overall cycle of benefits had passed, needing to plan for the next cycle. I hoped to seize the first-mover advantage in the upcoming next cycle and build my influence within the entire ecosystem.

At that time, the mainstream perception of Bitcoin was still quite shallow, viewing it merely as a digital form of currency. The focus of research was entirely on how to use digital currency for transactions. The real entry of Web3 into mainstream awareness should be attributed to ERC20, as people discovered that Bitcoin could actually be programmed, leading to the creation of a vast ecosystem.

Initially, computers were just machines. Web1 allowed people to share files over the internet, and the development of Web2 and mobile further advanced sharing behavior. The innovation of Web3 lies in the expedited construction of permissioned systems.

When users need protocols to obtain permissions, large companies naturally hold enormous advantages. In this ecosystem, large companies can stifle incoming companies and projects. Projects favored by large companies can grow, while those that are not beneficial to their interests struggle to find opportunities for growth.

Large companies always operate within the current paradigm, hindering the rights of future generations, which greatly stifles the vitality of the entire ecosystem.

The ideal ecosystem I envision should dramatically increase the ease of application development. However, many infrastructures today are still ineffective. For example, they often crash, and the dynamics of ownership differ after the infrastructure networks are dismantled. In Web2, large companies own entire sets of infrastructure, while in Web3, many small groups and nodes participate, such as the Ethereum public network or other Web3 infrastructures run by individuals.

Collective ownership, placing important matters under everyone's supervision.

In politics, there is a concept called "capture," where a group of people takes control of an organization or a functional department. If the organization is not well-designed, it can become infinitely corrupt due to this capture.

For example, if a country's central bank has design flaws, employees can print money at will. They can spend it freely. However, central banks have many regulations to avoid such situations. But some large Web2 companies may not be under everyone's supervision. Initially, they need to grow, so they consider everyone’s interests. Eventually, they inevitably become platforms that are good only for themselves but not for others, as their only task becomes to increase stock prices, rather than serving users to enhance reputation.

One of the initial challenges in understanding Web3 is that Web3 technology often changes the dynamics of competition. It uses mathematical methods to ensure that what I create will promote competitive dynamics, but it is important to note that certain competitive dynamics cannot be achieved.

For example, now "I" need to do something, but before that, "I" need to obtain permission. The method is for a group of people to vote on whether "I" can have this permission, using some underlying cryptographic functions or consensus mechanisms to ensure the fairness of the voting. In fact, these models can superficially be implemented in Web2, as Web2's programmability is also complete.

But the difference is that a large platform can arbitrarily change the rules. The platform can say today that everyone should come here because it is the friendliest platform. Tomorrow, it might say, "Sorry, since you all came to my platform, I want to change the rules because I want to make more money."

This is an inevitable trend; no matter how kind a company is at the beginning, as it grows to a large scale, it must shape the entire ecosystem to be most beneficial to itself.

YouTube is a typical example. Initially, it was a very friendly place for individual creators, but now YouTube is far from that. Now, YouTube prioritizes the demands of large advertisers because they are the ones funding it. It is very difficult for newcomers to gain traction on the platform. Now, an ordinary person needs to put in a lot of effort to gain tens of thousands of subscribers on YouTube, which was not the case before. Thus, the main change in Web3 is to ensure the realization of competitive dynamics through infrastructure and the mathematical design within that infrastructure.

I am optimistic about Web3 infrastructure, but social content at the foundational level is hard to break through.

For Web3, I personally see great potential in the creator economy. In the future, tools will change how creators earn money and how revenue is shared between creators and platforms, but what creators produce may not change much.

Regarding the SocialFi sector, we need to take a long-term view. In the short term, no Web3 infrastructure is better than Web2. Web2 infrastructure is far more mature, faster, and has greater scalability.

Facebook and WeChat have billions of users daily. Currently, Web3 products cannot support such a massive user base. Regarding the innovation methods and outlook for Web3, I would like to use the chip industry as an example.

Looking at the entire chip industry, there was a long period during which there was little competition within the industry because Intel dominated. In the early stages of the industry, many chip companies entered the market. However, as they gradually exited the competition, Intel became a giant. AMD was left as a company only because Intel, constrained by U.S. antitrust laws, did not want to be forcibly split.

Just as Microsoft invested in Apple back in the day because it did not want to become the only software system provider in the world, as that would lead to forced division.

Objectively speaking, Intel's chips are indeed the best-performing chips on the market. Users choose it for a reason, as it excels in the core metrics valued by users, although it is also relatively expensive.

AMD has existed for a long time, but when it was first established, no one paid attention to it. Initially, it only focused on design, while Intel handled the entire industry chain. Gradually, as mobile devices became more prevalent, people began to use AMD. This was because AMD offered a more open ecosystem, allowing any manufacturer wanting to create electronic components to build mobile chips based on its architecture. People began to use AMD for server chips; they could better customize and combine CPU chips according to their needs. Even Apple's A16 chip was produced using AMD architecture, and its performance surpassed that of Intel's chips. A significant portion of Intel's sales came from the server market, and as servers began to be eroded, it marked the end of Intel's monopoly.

In fact, today entrepreneurs may find it challenging to innovate in social networking. With giants like Facebook in the U.S. and WeChat in China, entrepreneurs find it hard to compete against these behemoths. This period may be akin to a low point in the entire history of Web innovation, similar to the years when Intel dominated the chip industry. Intel was lonely in its pursuit of victory, but the entire industry lacked innovation. Web3 seems to have opened a different path. Adhering to the principles of long-termism will have a profoundly positive impact on the entire network effect, even though new things often take time to impress at first glance.

The development of Web3 requires sufficient time to accumulate. Fundamentally, Web3 can create more long-term value and have a larger framework.

SwapChat & Web3MQ: If Web3MQ is Android, then SwapChat is the Google Phone.

When Google first created the Android system, it produced a phone so that people would know how to use the Android operating system. SwapChat is a demo DApp of MQ (Message Queue), and Web3MQ is the underlying communication protocol behind SwapChat.

Web3MQ is like Android, while SwapChat is the Google Phone, an application on the platform. I hope users can enter the world of Web3 by installing the SwapChat Chrome extension.

In the future, Web3 will see more intelligence being translated into specific scenarios and will delve deeper. Currently, Web3 is still in the early stages of collective construction. Today, having several tens of thousands of users for a Web3 application is considered a good achievement, but in Web2, an app with hundreds of thousands of users might not make much of an impact, given that there are six billion people in the world. I hope to co-build with practitioners in the early stages of the industry. As a pragmatic romantic, I want to see and realize what I believe in.

For me personally, the first important milestone is to ensure that 99% of the activity addresses for sending messages occur on SwapChat. I personally dislike the terms "first" and "second" because comparing first and second implies a comparison of homogeneity, which encourages entrepreneurs to create homogeneous products. If we compare horizontally, the performance of SwapChat in internal testing is the fastest in the industry. However, I hope we can truly empower the industry rather than simply fall into internal competition.

Social interaction is also related to the future metaverse. As the metaverse develops, the medium itself may also be innovated. We clearly do not want the communication experience to remain the same as the previous generation, where users can only experience social interaction in a limited way. Is there a more novel and exciting way to experience it? I hope to contribute to social communication and establish relationships between people. Of course, this requires building together with everyone in the industry, accelerating the dynamic changes of the next generation of Web3 social paradigms. In this process, being first would be great, but it is not the most important thing; what matters most is creating value for everyone.

In Conclusion

Social interaction has no end; no single product can possibly meet all needs.

Ma Huateng once said, "The one that defeats WeChat will definitely not be WeChat; it will be something else more fun. Imagination is the sky, tools are the foundation, and in between lies the evolution of humanity. Innovations in tools promote connections between people. Humanity once invented writing, and from then on, we had new means of interaction. Perhaps in the future of social interaction, we won't need to use language, yet we will already understand each other.

The future is enchanting because of imagination and vibrant because of creation. The future has arrived…