Unveiling the Decentralized Social Protocol Nostr: 18 Million Users, 5 Million Dollars in Funding

Author: Michael del Castillo, Forbes

Compiled by: Babywhale, Foresight News

Welsh software developer Ben Arc first encountered @Fiatjaf (a Nostr developer) in 2019 when he hacked a Pac-Man arcade game to accept Bitcoin. After struggling with software designed to simplify the process, Arc sent a message to the Bitcoin developers' mailing list seeking help. "The only person who replied to me was @Fiatjaf," Arc said, marking the beginning of a collaboration between two people who had never met but worked together frequently.

Their most famous collaboration is naturally Nostr, a protocol that has garnered 18 million users and reflects a growing discontent with the networks operated by large companies. In his first media interview, @Fiatjaf expressed frustration with Twitter's increasing user bans. However, he couldn't switch to a competitor while retaining his followers. Inspired by Arc's idea of creating a marketplace, he began developing a new protocol to manage identities: first for social networks, then for anything else.

Nostr's architecture allows users to take their profiles and followers to any competitor using the same protocol, as Nostr has established a "network of interoperable networks." This concept has gained traction, and in recent months, at least a dozen decentralized social media alternatives have accumulated millions of users, partly due to widespread dissatisfaction with Twitter's privacy censorship and civility policies.

Nostr stands for Notes and Other Stuff Transmitted by Relays; rather than being an actual network, it is a set of instructions for connecting identities. It initially piqued the interest of tech-savvy developers, and later, it caught the attention of Twitter co-founder and former CEO Jack Dorsey when it had only a few hundred thousand users. He donated 14 Bitcoins (worth about $200,000 at the time) to @Fiatjaf, who distributed the proceeds to Nostr developers.

While Dorsey was still running Twitter, he invested $13 million in a similar decentralized social media project called Bluesky, which had just opened to a million users on its waiting list. This month, Dorsey donated another $5 million to Nostr. Compared to its early iterations, Nostr has made the network more accessible, developing a secret weapon: allowing Bitcoin transfers between users. There are already 500,000 daily users of Nostr who have sent 792,000 micro Bitcoin transactions called zaps, worth $1.9 million, while dozens of companies are building new applications on Nostr.

"If a giant company starts doing things on Nostr today, they might control the protocol, which is not a good thing," @Fiatjaf said. "The same would happen if the protocol were created by that big company. But as the protocol grows, many companies will be drawn in, each making money in their own way."

This article is based on multiple interviews with @Fiatjaf and people around the world who have joined what he initiated as a social movement. Among those interviewed, only one claimed to know @Fiatjaf's real name. Some of his personal details could not be verified, but the information we could confirm is accurate and reliable.

@Fiatjaf said he was born in 1991 in the densely populated southeastern region of Brazil. From a young age, his entrepreneurial parents warned him that taxes and regulations harmed their businesses. While interning at a local Fiat factory with his classmates, he received a cap with the company logo. Years later, when naming himself in an online game, he saw the cap on the table, merged it with an old identity JAF, and thus created his pseudonym, though he refused to disclose what JAF stands for.

In the early 2010s, while studying economics at a university in Brazil, he became fascinated with the Austrian School of Economics, which teaches that large economies are too complex to plan. In 2011, he discovered Bitcoin on a website commemorating Austrian economics founder Ludwig von Mises, when the cryptocurrency was valued at about $15. He immediately downloaded the software and began mining. "It didn't go well," he laughed, "I mined for a night and only got 5,000 satoshis."

After briefly exploring other cryptocurrencies, @Fiatjaf began writing software to connect Bitcoin and other decentralized technologies, launching an experiment called Piln in 2018 that allowed servers to charge small amounts of Bitcoin for storing files in a decentralized database. But his breakthrough didn't occur until June 2019 when software developer Arc sought help to hack Pac-Man. Arc shared an idea called Diagon Alley—named after a market in the Harry Potter stories—that theoretically would allow virtual shop owners to move their storefronts from Amazon to the dark web. Seeing the potential in this idea, @Fiatjaf began working on his own version applicable to any type of identity.

"A few months later," Arc recalled, "when I read the protocol he developed, I said, 'Dude, this is like Diagon Alley,' and he said, 'This is one of the factors that influenced the founding of Nostr.'"

Before the year ended, @Fiatjaf's idea had become what he called the Nostr Manifesto, describing an open, censorship-resistant global social network. Computers that send short messages to each other and form the network's lowest layer are called relays, while applications, such as social networks or markets built on relays, are called clients. It does not identify users with public keys like Bitcoin but defines users without an underlying blockchain. Nostr is merely a series of instructions on how to build interoperable applications. "A lot of what people want to see is built on Bitcoin," Arc said, "but it can actually be built on Nostr."

A month after @Fiatjaf independently published the manifesto, then-Twitter CEO Dorsey launched Bluesky with similar goals.

By early 2020, @Fiatjaf caught the attention of his current part-time company Zebedee, a Hoboken, New Jersey-based video game startup that develops software allowing game developers to offer Bitcoin rewards to players. After repeated pleas from 31-year-old Zebedee co-founder Andre Neves, @Fiatjaf accepted a full-time remote job overseeing an internal project called NBD.WTF, which currently includes five Bitcoin-related projects and Nostr.

Neves said, "He would spend a weekend researching some randomly created open-source projects because he believed they had value for others, not because he wanted to sell them or build a product, but because he wanted to create something for others, solve their problems, and improve the world."

A Twitter controversy accelerated the establishment of Nostr. In January 2021, billionaire Jack Dorsey banned former U.S. President Donald Trump from using Twitter. Then, billionaire Elon Musk acquired the company and quickly alienated many of its most loyal users by charging for services they deemed important, such as two-factor authentication. Although Nostr had been in development since 2019, it deliberately took an unorthodox path. "No company," @Fiatjaf said, "nothing at all."

Nostr doesn't even have intellectual property licenses. Instead, @Fiatjaf chose to treat the software as a public product, which could lead to legal issues for himself and others if certain code in the protocol is copyrighted by others, according to Thomas Stanton, a partner at Stanton IP Law in Florida. "If issues arise, he and any users could be held liable." But @Fiatjaf is not worried. "I don't care about this licensing," he said, "I just want people to use it; I don't understand these things and try not to."

Since anyone can use the Nostr standard to develop applications, it's hard to pinpoint when the first users of Nostr-based applications appeared. However, in April 2022, the number of new users surged from a trickle to a downpour. 34-year-old Bitcoin engineer William Casarin launched Damus on the Nostr protocol, initially aimed at simplifying access to Nostr in a Twitter-like environment. He founded Damus at the end of 2022. In January of this year, Damus went live on the App Store. Casarin, who previously worked at Bitcoin infrastructure company Blockstream, designed a payment method for Nostr users to send zaps via the Lightning Network. Shortly thereafter, @Fiatjaf added Casarin's upgrade to the Nostr protocol, allowing anyone to develop according to the same specifications.

This new feature proved crucial. Before that, while many developers of Nostr applications were Bitcoin enthusiasts, the protocol reflected very little of that. After supporting Bitcoin payments, Damus's user base grew from 10,000 to about 160,000, and the total number of Nostr users jumped from 10 million to 18 million. Before the Chinese government banned the app for allegedly supporting content deemed illegal in China, about 25,000 Damus users were from mainland China. Casarin believes Damus was banned because it is a tool for free speech, referring to the ban as a "badge of honor."

Now, there are not only 9 Nostr projects using zaps, but the ability to send Bitcoin is also supported by Block CEO Dorsey. Block has become a Bitcoin investment company, holding a stash of cryptocurrency worth $220 million as of December 31, 2022, and is entering the emerging social commerce space that intersects payments and social media. Accenture estimates that the social commerce industry will reach $1.2 trillion by 2025.

In early 2021, Serbian-born developer Rockstar drew Dorsey's attention to Nostr. Frustrated that Bluesky CEO Jay Graber's detailed analysis of the decentralized social media ecosystem did not mention Nostr, he privately messaged Dorsey on Twitter, suggesting he take a closer look. To Rockstar's surprise, a few days later, @Fiatjaf received an email from Twitter corporate development strategist Arnold Jun. "I read your article about Nostr and really liked the simplicity of your approach," Jun wrote, "Can we chat?" @Fiatjaf was not pleased upon seeing this.

"Your approach is too dangerous," @Fiatjaf told Rockstar in the Nostr Telegram group, "We're trying to run a grassroots movement here, and you're talking to JACK?"

Rockstar replied, "Life needs some excitement; you have to talk to him; they seem to have more talkers than doers."

"I'll talk to that person, but I'm skeptical," @Fiatjaf wrote.

Dorsey did not respond to requests for comments on the article, but @Fiatjaf stated that after the billionaire tweeted to the world that he was trying to "figure out" how to fund Nostr, he sent a private message asking how he could support the protocol.

"I didn't know how to respond," @Fiatjaf said, "I suggested he could fund some developers, but later he asked if he could give me the money and let me decide how to use it, and he gave me 14 Bitcoins." @Fiatjaf gave half to Casarin. Then, in May of this year, Dorsey donated another $5 million to a nonprofit dedicated to supporting Bitcoin work, specifically funding development for Nostr. source

While Nostr is maturing, it is worth noting that Twitter and Facebook were initially relatively open platforms, only restricting access to developers when commercial interests forced them to. Nostr's business model is far from determined, and centralized threats have already emerged. While traditional social networks generate revenue by charging for advertising to support their massive server farms, blockchain social networks evade centralization by paying users with cryptocurrency, but Nostr developers are seeking a different way to sustain operations.

Zebedee and Arc's LNBits are developing a product that allows users to host their own servers using Bitcoin. Damus is experimenting with a tool that allows users to directly support company development, generating $145 in revenue in the first four days. If users are unwilling to pay, Nostr applications will turn into "charity." "Many advertisers have significant influence over these platforms," Casarin said, "If we can find a way to make money and achieve sustainability without annoying our users, that would obviously be a huge win."

Further centralization risks come from within. Only internal personnel recognized by @Fiatjaf have the authority to add features to the GitHub repository. An internal document shared with Forbes shows that he has authorized seven people, but few have used it.

So far, the limitation on the number of people authorized to modify Nostr has not deterred developers from participating; 7,500 people have built 26 relays to support the network, including decentralized chess games, a decentralized news site for independent journalists, and several decentralized clone applications of Twitter and Reddit; there is also a plan to provide "geolocation services" for taxis, similar to decentralized Uber. Arc is redeveloping Diagon Alley, renaming it NostrMarket, allowing users to transfer all their digital information. "Power is in the hands of the customers," he said, "it has almost become a form of activism."

As for @Fiatjaf, his latest project is an application that uses the Bitcoin network to allow experts to bet on future events, aiming to provide investors with more accurate predictions. "I have many projects with limitless potential."