Special Report | Nearly 500 Projects Compete for 8 Years to Finally Produce a Unicorn, Is Web3 Social Summer Coming?

Author: flowie, ChainCatcher

Editor: Marco, ChainCatcher

In the first two years before becoming a unicorn, Farcaster's founder took the most primitive approach to promote his social application: he personally lobbied Web3 individuals in his social circle, inviting them to join the platform, including Vitalik, who promoted Farcaster.

After thousands of grassroots promotions, Farcaster gained a group of elite seed users.

Web3 users led by early Twitter investor Fred Wilson announced their migration to Farcaster, with Vitalik's views often debuting on Farcaster.

On May 21, Farcaster announced the completion of a $150 million financing round at a valuation of $1 billion.

Since the launch of the decentralized content platform Steemit in 2016, which kicked off the Web3 social narrative, Web3 social has experienced eight long years.

Compared to the rise and fall of DeFi and GameFi, Web3 social is a more lonely story. Most of the early gold diggers like Steemit and Coinhive have ceased operations, while Lens, Damus, and friend.tech quickly fell into silence after creating brief sparks.

Farcaster seems to bring a glimmer of hope to Web3 social.

Users on the X platform tweeted, "There are no more innovative articles on Twitter." Vitalik replied, "Join the decentralized social protocol Farcaster, where there are many Cambrian explosions and strange events."

0xLuo, who has nearly 50,000 followers on Farcaster, told ChainCatcher, "For the first time, I felt real social interaction on a Web3 social platform, rather than just self-indulgence from the airdrop hunters."

At the same time, the extremely high ceiling brought by social network effects continues to "tempt" new and old players to rush in. According to RootData, there are nearly 450 Web3 social projects currently in operation.

In 2018, inspired by Steemit, a crypto-incentivized social product called Torum was developed, which made a comeback after facing setbacks. Torum's founder Jayson told ChainCatcher, "We are preparing to launch the Torum SocialFi V2 version."

With social entrepreneurship experience in Web2, UXLINK, former Web2 entertainment investor Tony, chose social as their first stop in Web3 entrepreneurship. They all stated, "Social is the necessary path for large-scale applications in Web3."

Although Web3 social has not yet matured, AC Capital investment manager Armonio recently stated in an article, "As Web3 technology continues to advance and the barriers and costs decrease, the emergence of real products may be happening right now."

The Most Primitive Way: Phone Outreach

Tony, co-founder of the Web3 social platform Tako, began preparing a plan to call 300-500 well-known founders, investors, or KOLs in the Chinese-speaking region he is familiar with, inviting them to join the Web3 social client TakoCast.

Tony plans to build it into an Asia-Pacific version of Farcaster. "Farcaster needs localized operations for communities in different language regions."

Phone outreach is something he learned from Farcaster founder Dan Romero, "The effect of making one-on-one calls is completely different."

Tony stated that for the first couple of years, Farcaster was largely in a "submerged circle." One of Dan Romero's most important tasks was to personally promote the platform.

Before founding Farcaster, the two co-founders, Dan Romero and Varun Srinivasan, held key positions at Coinbase, serving as Vice President of Operations and Platform Developer, respectively. Farcaster's early investors were also top VCs like a16z, Coinbase Ventures, and Multicoin.

The first 2,000 users of Farcaster were basically from the elite circles of its founders, Dan Romero and Varun Srinivasan, consisting of the most prestigious founders, investors, and Ethereum community users in Web3.

"This group of elite seed users created real social interactions on Farcaster," as they shared various views on technology, entrepreneurship, investment, and even life.

In Tony's view, "Farcaster has built not just an elite community of big names, but also a resource hub that provides unlimited imagination for subsequent ecological construction."

Compared to whether to be decentralized or which innovative technologies to adopt, the migration and "promotion" by big names are more appealing.

In mid-2022, after Farcaster announced the completion of a $30 million financing round led by a16z, it did not attract Web3 social frontier player 0xLuo to participate in project interactions, "because I found the invitation code cumbersome, I just put it aside."

It wasn't until October 2022 that Vitalik tweeted on the X platform, including his personal Farcaster and other Web3 social account addresses, that 0xLuo began to pay attention to Farcaster.

"If Vitalik is promoting it, I definitely want to participate," 0xLuo privately messaged Dan Romero on the X platform, requesting an invitation code.

Half a year later, 0xLuo finally received the invitation code to enter Farcaster.

Initially, 0xLuo did not find Farcaster's features and technology particularly special, "but it brought me closer to the big names." On the X platform, you can only like the big names, but on Farcaster, you can see them up close; they also like you, and you can message them at any time with a high chance of getting a reply. "Even without token incentives, being in the circle of big names is very attractive."

Moreover, due to the high quality of users, project alpha opportunities closely related to Farcaster are also prioritized for release on Farcaster, which is another major reason for his attraction.

After shifting his main battlefield of Web3 social to Farcaster, among the many Web3 social projects he participated in, Farcaster brought him the most followers.

0xLuo told ChainCatcher that at the beginning of this year, he had fewer than 2,000 followers on Farcaster. "As Farcaster's daily active users broke 50,000 in February, my followers began to surge along with the increase in Farcaster's user base, far exceeding the more than 2,000 user followings on the X platform."

Crypto KOL Aping also entered Farcaster back in October 2022. Aping shared in a small universe podcast that what made her feel different about Farcaster was that the Nouns DAO she had been following for a long time entered Farcaster without any proposals, as most members coincidentally joined.

"Nouns DAO had been looking for a social platform to discuss public affairs and had chosen Discord through proposals, but the Nouns DAO Discord channel was abandoned after being closed and reopened."

No Longer Obsessed with the Idea of Decentralization

In the early days of Web3 social, the focus was on decentralized narratives, especially peaking after Reddit was banned in 2021.

In early 2021, a group on Reddit called "WallStreetBets" led retail investors to band together to create a short squeeze, causing at least two hedge funds that shorted GameStop to go bankrupt.

However, after a brief frenzy, retail investors in the U.S. abruptly stopped, and the stock trading codes were deleted, leading to Reddit's ban.

Joshua Meng, founder of the open information layer RSS3, recalled that there was a very strong demand for decentralized social or social anti-censorship at that time, "because people thought that decentralized finance must require decentralized social."

Now, the Web3 social project represented by Farcaster has initially adopted a relatively centralized strong operational approach, with the tech stack emphasizing the "sufficiency" of decentralization. Joshua Meng feels that "more Web3 social entrepreneurs are moving from idealism to realism."

The two founders of Farcaster, Dan Romero and Varun Srinivasan, mentioned this shift in thinking in a recent interview.

Dan Romero noted that after entering the market in 2021, he found that people were talking a lot about decentralization in the cryptocurrency field and the demand for other applications in the ecosystem. "We naively thought that people would really want to try new things, but it turned out that users preferred to continue using existing products."

Despite concerns about Twitter's development after Musk took over, the network effect of Twitter is stickier than he initially thought. "The only way we can win is not because of the architecture, but largely by creating products that people love."

Earlier this year, a feature similar to embedded mini-programs called Frames brought explosive growth to Farcaster. It allows developers to embed interactive experiences in Farcaster posts (casts), such as voting, minting NFTs, building games, and even conducting instant transactions directly within social media dynamics, eliminating the need to switch web pages when browsing content and interacting on traditional social platforms.

Since its launch on January 26, Farcaster's daily active users grew 20 times in less than 10 days.

0xLuo believes that the emergence of Frames truly differentiates Farcaster from the X platform and sets a good precedent for its ecosystem's crypto-native innovations.

The strong resource operation model of Farcaster is not something that any Web3 project team can replicate. However, a number of Web3 social projects, like Farcaster, are also trying to explore the real needs in the Web3 field, starting from specific demand tools.

"Without addressing a real pain point for Web3 users, it will ultimately be unsustainable," said Jayson, the founder of Torum, who belongs to the earliest batch of Web3 social gold diggers, a lesson he learned after encountering pitfalls.

Social Interaction is More Important than Token Incentives

In 2016, a social media platform resembling a blog forum called Steemit was launched. On Steemit, users could publish content (articles, images, comments) and receive system reward tokens called Steem based on user votes and comments.

Steemit returned content asset rights to users by putting content on-chain.

Within a year, Steemit garnered over 168,000 registered accounts. Inspired by Steemit, Jayson began developing a similar crypto-incentivized social platform called Torum in 2018, where users could earn XTM tokens by posting, inviting friends, and sharing content.

This incentive model did not achieve the expected results. With the arrival of the bear market, the Torum V1 platform could not provide sufficient rewards, leading to a rapid loss of users who had participated with profit expectations.

After Torum V1, attempts were made to lower the platform's entry barriers and aggregate multiple media platforms to enrich content, but ultimately, user growth remained limited.

Jayson stated that if user attraction relies solely on token incentives, it will ultimately backfire. "From 2016 to now, all Web3 social projects that tried to attract users solely through token incentives have failed."

In terms of incentives on Fi, this year, the reward methods through memes like Degen on Farcaster may become a superior token incentive platform project technique.

"Social occupies 80% of Torum V2, while Fi will only occupy 20%," Jayson hopes to establish a higher quality social network in Torum V2, similar to Farcaster. Jayson chooses to start with more vertical NFT players to address the pain point of NFTs having almost no use cases.

Previously, NFTs could only serve as personal avatars; Torum V2 aims to transform NFTs into ready-to-use mask filters. It is similar to the special effects filters on short video platforms, allowing users to use and spread them in a trend-driven manner.

Jayson analyzed that the explosion of Web2 social platforms like Facebook originated from a unique and innovative content creation tool, and Web3 social will follow a similar logic.

Rather than expanding scale by leveraging a small number of quality Web3 users, UXLINK takes a more pragmatic approach by seeking opportunities in larger traffic pools.

UXLINK mentioned that users currently want to discuss Web3 projects and discover investment opportunities.

"Familiar social platforms like WeChat and Facebook are more likely to generate trust relationships and transactions."

The core team of UXLINK greatly appreciates the familiar mutual assistance gameplay of Pinduoduo and TEMU, "which has succeeded worldwide." Thus, UXLINK replicated this similar model in Web3 social, choosing Telegram, which also has massive traffic but lower risk control.

UXLINK utilizes a Link To Earn incentive mechanism, allowing C-end users to invite acquaintances into Telegram groups, providing them with a social space for project discussions and participation.

With a large amount of C-end traffic, UXLINK monetizes by serving B-end Web3 developers who need traffic. UXLINK claims its registered users have surpassed 10 million, and its income and expenditure have balanced.

"Web3 social has always been a heavy investment area," said Bill, an investor from UXLINK's investment firm Cypher Capital, who is also more pragmatic about investing in Web3 social.

In the context of the overall low user scale in Web3, compared to closed applications that require building their own traffic, it prefers social projects that can find traffic pools from the start.

In Bill's view, "Without a user base, one can only rely on narrative to issue tokens, making a quick profit from market sentiment."

A Better Timing

The lack of sound infrastructure in Web3 is also a major reason for the setbacks faced by early gold diggers.

Douyin (TikTok) launched on September 20, 2016, two months after Steemit. Compared to Douyin's user-friendly approach, logging into Steemit required overcoming several hurdles.

Jayson, an early player on Steemit, mentioned that wallets like MetaMask were not yet popular, and Steemit's official wallet would generate four keys when users created accounts, each representing a different permission, such as logging in with one key and publishing content with another. "As a novice, it felt very helpless."

Before founding Cyber (originally CyberConnect), Ryan and his founding team had previously launched a decentralized live streaming platform called Dlive in 2018. At that time, there were not many developers on Ethereum due to the lack of infrastructure. In addition to developing products, Dlive also needed to create its own chain for deposits and withdrawals.

Dlive peaked at 1 million daily active users and had the largest YouTuber at the time, Pewdiepie, exclusively live streaming on the platform. Ryan mentioned that timing is also crucial, "We were doing it relatively early; if we were to do it today, Dlive might have achieved a broader success."

Tony, co-founder of Tako, believes that the moment for large-scale applications like Web3 social has arrived.

On one hand, the entire Web3 infrastructure is growing, leading to a better user experience. For example, wallet logins are transitioning from mnemonic phrases to MPC and abstract accounts, lowering the barriers to application usage.

As public chain transaction speeds improve, gas fees are also decreasing. Tony stated, "Playing DeFi might yield a few hundred dollars, and a $10 transaction fee is still bearable. Social is a very high-frequency content; if users have to pay $10 in gas every time they comment or repost, no one would want to play."

With the expansion of public chain networks, they can also accommodate more concurrent user messages, such as supporting multimedia in addition to just text.

On the other hand, while Web3 social applications have yet to achieve large-scale adoption, a number of entrepreneurs are beginning to turn to building Web3 social infrastructure, providing the "puzzle pieces" for the birth of blockbuster social applications.

Ryan mentioned that now when developers create an application similar to Dlive, they only need to focus on the product itself because they can choose social-specific chains like Cyber, which allows them to utilize the social graph built by Cyber. Cyber will soon integrate DEX to help applications solve user deposit and withdrawal issues.

Currently, there are more Web3 social protocols than applications, and major protocol ecosystems maintain strong openness.

Earlier this year, 0xLuo discovered that more interesting clients began to emerge on Farcaster, such as the Web3 version of TikTok, Drakula, and the Web3 version of Instagram, Jam. At the same time, some aggregation clients not only support Farcaster but also other protocols like Lens.

"Major protocols serve as infrastructure for each other, driving traffic," the Lens ecosystem application Phaver also chose to hold events on Farcaster while already supporting cross-platform posting on Lens and Farcaster.

Firefly, under Mask Network, supports simultaneous posting across different social platforms like Farcaster, Lens, and X, and aggregates content from Mirror and Paragraph blogging platforms.

Is the Singularity of Web3 Social Approaching?

Uniswap drove DeFi Summer, Axie defined GameFi 1.0. With Farcaster becoming a unicorn, is the singularity of Web3 social approaching?

0xLuo believes that Farcaster + composable application Legos + scene memecoin economics represented by $DEGEN have already opened the on-chain Social Summer.

Joshua Meng, founder of RSS3, remains cautious. He believes that although Farcaster's current development momentum is strong, it has yet to break through the bottleneck of being a Single Tribe Network. The current prosperity is closely related to the early high-quality seed users.

Farcaster operates almost identically to the once-popular Clubhouse. However, as users were opened up, the social quality on Clubhouse quickly declined, and early elite seed users also left.

Joshua Meng stated that in the past one to two years, Web3 social projects like Farcaster, Lens, Nostr, and friend.tech that had shining moments attracted users more through Web3-native ideologies and economic incentives, which is fundamentally different from traditional social businesses that rely solely on product and experience innovation.

Jayson shares a similar view, stating, "Web3 social remains a very vague concept; whether it is social for Web3 users, decentralized social, or blockchain-based social, no project has emerged to define Web3 social at this stage."

Joshua Meng predicts that it will take longer for the endgame of Web3 social to arrive. This is not just something that Web3 entrepreneurs can achieve through innovative solutions to pain points; it resembles a societal transformation.

"Like electric vehicles compared to fuel cars," early users were not sensitive to replacing gasoline with electricity, but with projects like Tesla providing better user experiences, educating the market, and national policies incentivizing the shift, the automotive industry entered the era of new energy.

Currently, Web3 social entrepreneurial projects and teams need to gradually achieve mass adoption of decentralized social through different paths and prepare for the arrival of the endgame.

Although the singularity may not have appeared yet, AC Capital investment manager Armonio believes that "everything is progressing. The experiences and lessons accumulated in the industry, along with continuously advancing technology, are pushing us closer to the singularity of industry explosion."