Web3 Social Myth: Not Understanding the Difference Between Social and Community, and the Disastrous X to Earn Model

Author: Beichen, The Jarring Whistle

The Web3 industry has emerged from a sluggish bear market over the past year. Although we have yet to see a true bull market, the voices about the impending Social Summer are growing louder. This is especially true following the recent arrest of Telegram founder Pavel Durov at a French airport due to multiple charges including fraud, money laundering, and terrorism, which has further sparked interest in social products.

It is not hard to understand that the crypto-native technological route seems to have reached its end (after all, the necessary infrastructure is already in place), but the dawn of Mass Adoption is still not in sight. The social track, in theory, is the easiest to leverage for massive user engagement and has the potential to solidify into an ecosystem. Thus, it carries the anxiety of the stagnant Web3 industry; whenever social applications like friend.tech or Farcaster perform slightly better, they attract the attention of the entire industry.

While I also have high hopes for the social track, I must raise a jarring point—the entire Web3 industry is filled with misconceptions about the social track, often based on an outsider's assumptions, and the depth of misunderstanding is comparable to that of collectibles, RWA, and DePIN.

We must first understand Social well enough before we can discuss how to integrate it with Web3 to create Web3 Social (or DeSo).

1. Social and Community

Whether it is Web3 Social, DeSo, or SocialFi, the concept ultimately boils down to providing real services to actual users, which requires a clear distinction between services aimed at social interaction and those aimed at community building. Most of the time, people seem to conflate the two, especially in the Chinese context, where they have almost become synonymous. However, social and community are two different levels of concepts.

1.1. Social: Starting from Communication

In a broad sense, social products begin with social interaction (which is more accurately described as social interaction), and social interaction starts with communication.

Social interaction is a micro-level exchange behavior, occurring between two individuals or within a group of many individuals, and the means of achieving social interaction is communication. Therefore, social products must start with communication software.

Email was the earliest communication tool, first implemented by MIT in 1965. In 1973, the University of Illinois developed the first online chat system, Talkomatic, on the PLATO system, where users could even see the letters being typed in real-time. Since then, various communication software has continued to iterate, and today we use online chat applications like WhatsApp, WeChat, and Telegram, along with various email services, which already possess the core communication functionalities.

So why do users keep switching communication software? In fact, behind every successful communication software, there is an indispensable reason driving users to use it. Summarized, there are three reasons: either it is free, or it helps users find the right people, or it resists censorship.

Tencent is a successful case driven by free services. In 1999, when the three major telecom operators had not yet launched SMS services, OICQ (later known as QQ) bypassed the telephone network to send messages for free. However, sending and receiving messages on a computer was cumbersome, which gave the three major telecom operators, who launched SMS services in 2000 at a charge of 0.1 yuan per message, an opportunity. This also laid the groundwork for WeChat's rise in the era of smartphones.

But why was the opportunity given to WeChat instead of the more mature QQ? Firstly, because the mobile QQ in the early mobile internet era merely ported the old PC product to mobile, and its user experience was inferior to that of WeChat, which was originally designed for mobile. More importantly, WeChat was the first to introduce features like voice messages, voice calls, and video calls, completely replacing SMS and voice call services on mobile phones.

Speaking of which, if we follow the logic of being free, the next communication software driven by free services should be free satellite calls and satellite internet.

A successful case driven by finding the right people is various dating apps, such as Momo for meeting strangers, Blued for specific minority groups, and Qingteng Love for high-education matchmaking… The successful cases driven by resisting censorship include Telegram, Signal, and others.

Clubhouse, which combines the characteristics of finding the right people and resisting censorship, made this otherwise common voice chat software highly sought after upon its emergence, as it attracted influential individuals and allowed for lively discussions.

In summary, social interaction is the most basic social behavior, and the fundamental function of achieving social interaction is communication. Even the most complex social products start from communication, continuously integrating new services to evolve into community products.

1.2. Community: Social Media and Social Networking

The complex organism formed by social behaviors among many individuals and groups is what constitutes a community.

Note that a community is not a simple collection (many people understand a community as "just forming a group and having daily chats…"), but rather a collective of members who support each other based on common demands (such as interests, visions, etc.). This means that members must contribute certain information, resources, etc. When the resources demanded by community members exceed the resources produced, the community will decline. Like cancer cells, they only replicate and consume the body's energy until the host also dies.

Thus, building community products is far more challenging than building social products; it is almost a religious topic. Capturing a specific pain point in communication (like free voice chatting back in the day) can lead to temporary success, but the subsequent performance of most social products has confirmed that retaining users is far more difficult than attracting them.

Based on the different ways community products retain users, we can categorize them into two types: content-centric and relationship-centric products, namely social media and social networking services (SNS). These two terms can easily confuse the concepts of social and community.

Content-centric social media can be traced back to Notes, which was born in the PLATO system in 1973 (the same year the first online chat system, Talkomatic, was created). Notes already had the rudiments of a BBS, and various forums, message boards, blogs, and other community products developed from there. They all center around interests, thus continuously retaining user-generated content (UGC), eventually evolving into the social media platforms we know today, such as Twitter, Weibo, Instagram, and Xiaohongshu.

Relationship-centric social networking services are essentially what was previously described as "communication products driven by finding the right people." However, only when a product is genuinely treated as a communication list does it qualify as a true social network. For example, WeChat is aimed at offline acquaintances, Momo is for meeting strangers, and LinkedIn is for professional networking…

1.3. From Single Function to Comprehensive Platform

However, even if we clarify the distinction between social and community, the definition of social products may still be chaotic. This is because current social products often no longer have a single function but instead integrate various functions across different levels and dimensions.

This is the root cause of all the confusion regarding social products—focusing solely on the surface-level functions of the product while failing to restore the product's true driving force and evolution.

Taking WeChat as an example. It quickly migrated users' real social networks through the free text and voice messaging functions, creating a massive network of acquaintances. Then, it expanded into the stranger social market with features like "People Nearby" and "Shake," rapidly surpassing 100 million users.

Later, it supported voice and video calling functions to strengthen its communication advantages and successively introduced features like "Moments," "Official Accounts," and "Video Accounts," evolving from a social network into a social media platform. The addition of payment functionality even caught Alipay off guard.

This approach can also be used to analyze X, Facebook, Telegram, and even Douyin, but almost all analyses of Web3 Social today seem like a user who has only used WeChat for the past two years trying to analyze it—naively mixing various functions together for analysis, making it difficult to grasp the product's focus. Entrepreneurs guided by this mindset merely replicate another WeChat, starting from a comprehensive set of features without considering how to acquire and retain the specific real users those features target.

Thus, this article could also be structured around different communication methods, content types, social relationship types, and media types, creating a beautiful table and then using internet jargon to analyze those randomly combined results (for example, "an encrypted app for Web3 practitioners that supports voice calls and live streaming functions and can facilitate transactions"), making it seem like a highly professional market research, but it actually lacks any practical guidance.

2. The Panorama of Web3 Social

After laying the groundwork about social, we finally need to talk about Web3! Web3 Social is far more complex than the various internet social products mentioned earlier, as the entire internet protocol fundamentally differs from blockchain protocols.

2.1. Model Hierarchy: Internet vs. Blockchain

The internet can be divided into seven layers according to the OSI model, and developers only need to consider the top application layer. However, blockchain has not yet been fully defined, making it relatively complex. Here, I present a layered model for reference, which we can use for analysis.

In the blockchain world, if the blockchain network is layer 1, then the internet is layer 0, serving as the underlying communication infrastructure. The blockchain network can also be subdivided into different layers, such as network layer, data layer, consensus layer, and incentive layer. Although there are various layering schemes, the mainstream approach currently is to package them together in public chains, so we will discuss public chains directly.

Above the public chain is the protocol layer, which encapsulates various script codes, algorithms, and smart contracts. It is worth noting that these are not terminal products, but rather key components that implement minimal functionality. Some are smart contracts executed on-chain, while others are middleware executed off-chain.

Since blockchain is a shared data layer, these smart contracts are open and can be used infinitely. Therefore, later developers can theoretically combine and optimize these smart contracts and middleware to build new applications.

The problem is that currently, both smart contracts and middleware at the protocol layer are still very lacking (most innovations are concentrated in the DeFi field, and the social track lacks revolutionary products). Thus, the possibility of building products suitable for Mass Adoption at the application layer based on this foundation is also quite low.

2.2. Two Logics: Bottom-Up vs. Top-Down

Specifically in the Web3 Social track, there have always been two product paths competing—crypto natives tend to build native crypto social products from the bottom up, while entrants from Web2 prefer to first create mature Web2 products and then gradually add Web3 modules.

2.2.1. Bottom-Up Approach

The bottom-up approach has two types: one is to establish identity management infrastructure centered around accounts, and the other is to develop a social graph centered around content.

In the Web2 world, the most important account is the email, while in the Web3 world, it is the DID (Decentralized Identifier), which users create and manage on the blockchain, allowing for private interactions with other applications.

The most typical representative is ENS, a decentralized domain name system built on Ethereum that allows individuals, organizations, and even devices to create and manage their identities/digital identifiers (though the earliest on-chain domain name system was Namecoin, which forked from the Bitcoin network in 2011).

However, this type of DID project faces the issue that aside from being used as wallet domain names, there are no truly essential application scenarios…

The social graph centered around content allows users to put their social data on-chain, such as personal profiles, posts, follows, etc. The most typical representative is Lens Protocol, which tokenizes and NFTs users' social data and behaviors, allowing developers to build new social applications based on this. However, no truly viable social applications have emerged yet.

Additionally, simple tools like Blink are worth noting, as they can convert on-chain behaviors into links that can be embedded into various websites and social media platforms.

2.2.2. Top-Down Approach

As for the top-down approach, it is quite simple: it involves modifying mature social products for the blockchain, but it can also be subdivided into two types.

One is to first create a mature Web2 social product and then gradually add Web3 modules. The earliest and most successful example of this is Bihu, which has since been shut down. Although many similar projects have emerged, especially in 2022 inspired by the X to Earn model, which introduced mechanisms like mining for posting, commenting, and chatting, most of them have now failed. This is because the SocialFi model is inherently unsustainable, and the reasons will be elaborated later.

Currently, among various social products transitioning from Web2 to Web3, the only one performing well is Farcaster, which is very restrained. It has not adopted the SocialFi model but has seriously nurtured a crypto community, with Web3 functionalities existing as plugins. It is important to note that crypto communities naturally have a wealth effect, which has led to the emergence of various memecoins represented by Degen (by the way, if listing were as easy as issuing tokens, Snowball would crush all major companies).

The other approach is quite subtle and can easily be mistaken for a crypto-native product. They often have decentralized databases combined with modules like DID and DAO tools, allowing anyone to build their own Web3 applications on top.

Its deceptive nature lies in the fact that all modules appear to be Web3, giving an impression of comprehensive functionality. However, if you step back, you will find that it is essentially just a mature Web2 social product expressed entirely in a Web3 manner (for example, using cryptographic signatures and distributed systems), which does not fundamentally differ from Web2 products.

For instance, Ceramic and UXLink seem to span the entire application layer to the infrastructure layer, covering multiple aspects from underlying technology to user interface, creating a very complete Web3 social ecosystem. This is akin to constructing a wooden loft using reinforced concrete; it can exist but is unnecessary, as one could design a new form of building based on the characteristics of reinforced concrete.

2.2.3. Limitations of the Two Product Paths

In summary, whether it is the identity management infrastructure centered around accounts, the social graph centered around content, or merely re-expressing mature Web2 social products entirely in a Web3 manner, these various ideas seem more like preparations for doomsday survival players in the digital world, which are unnecessary for the general public. Thus, it often leads to "respect but not understanding," making it difficult to produce a mass-market product along this path.

Perhaps we should set aside our fundamentalist biases and reevaluate the vitality of products like Farcaster, which are Web2.5, and this brings us back to the ability to create social and community, which is fundamentally about skills beyond technology.

3. X to Earn and Its Applicable Scenarios

However, regarding Web2.5 products, imagination is almost monopolized by "Web3 versions of XXX," such as Web3 version TikTok—Drakula, Web3 version Instagram—Jam, etc., where the Web3 aspect is merely reflected in the monetization of the business model, namely Fi, or what we are more familiar with as X to Earn.

3.1. The Essence of Monetization is Points Mall

Monetization seems to be the only magic weapon for Web3 to overhaul all internet products, whether it was the "token faction" and "chain modification" popular in 2017 or the "X to Earn" trend that began in 2021. Essentially, they all incentivize user retention through profit-sharing.

In fact, there are already mature point systems in the internet field, using the model of "complete tasks - earn points - redeem products or rights in the mall" to enhance app user activity, but it is merely an auxiliary operational method. After all, money does not appear out of thin air; if the wool cannot be pulled from the sheep, it must come from the pig. In any case, in a normal business model, such subsidies have long-term cash flow bottlenecks.

Only financial schemes can break the cash flow bottleneck, directly developing a product dominated by point systems and then letting later entrants take over. Around 2015, many middle-aged women in third- and fourth-tier cities were promoting various apps that supposedly could earn money but required a membership fee upfront.

However, the popularity of ICOs provided a more ingenious way—while financial schemes still needed to recruit people offline to find successors, ICO projects could directly issue tokens without needing anyone to take over. Existing users, as long as they had an expectation of price increase, might even increase their holdings, and there was no issue of finding a specific person for rights protection in the secondary market.

Thus, the monetization of the vast majority of Web3 products is essentially still the point mall model of the internet, except that the points redeemed are not products bought with real money but rather the market value expectations of the secondary market.

3.2. Challenges of Monetization Schemes

Of course, we should not completely deny monetization; it just has specific applicable scenarios, at least not suitable for the vast majority of social and community contexts.

The first challenge is actually a management bottleneck—with the current performance evaluation levels, it is impossible to accurately identify users' effective behaviors, which means that appropriate incentives cannot be targeted, ultimately leading to attracting opportunists.

Even if the rules are precise down to how many minutes to retain daily or which tasks to complete, they will be easily exploited by "wool-pulling studios," where real users are less competitive than bot accounts. This is a challenge that almost all "X to Earn" projects have failed to avoid.

Moreover, even if the project team can indeed distinguish users' effective behaviors and has formulated reasonable incentive plans, it is inherently unsuitable for social/community products due to psychological challenges—monetization shifts users' motivations from the product itself to the incentives, so when the incentives weaken, users' motivation to use the product disappears.

Worse still, for a social product, a good social experience itself is a reward for users, while the SocialFi model constantly shifts users' attention from pure social experiences to monetary incentives, ultimately leading to users losing interest in the product itself.

3.3. The Absurdity of SocialFi

If we were to develop a dating app based on the SocialFi model, quantifying various tasks couples need to do daily, such as chatting, sending flowers, kissing, hugging, etc., for rewards, the final dating experience for couples using this app would be extremely dull.

If you also find this dating app design absurd, then SocialFi projects operate in the same way. The absurdity of SocialFi can be explained by the psychological phenomenon known as the overjustification effect—monetization adds excessive external reasons to behaviors that already have sufficient intrinsic motivation, thus controlling users' actions through these external reasons.

If we want to monetize users' behaviors, it is only suitable for rigid payment scenarios, such as gambling, drugs, or fan economies. Users already have a strong willingness to pay, which can provide a continuous cash flow. In this case, using monetization as an auxiliary operational method can enhance the experience.

Currently, all monetization (X to Earn) projects appear to be intricately designed but do not bring long-term positive revenue, leading to a decline in a cycle of stagnation.

Conclusion

Web3 Social carries the entire Web3 industry's expectations for Mass Adoption, but it is currently shrouded in layers of cognitive fog.

Myth 1: There is a widespread confusion between the concepts of social and community, leading to a focus on the surface-level functions of products while ignoring the true driving forces and evolutionary paths of the products. Consequently, product design and positioning tend to lean towards creating overly comprehensive products, filled with assumptions about their prospects. In reality, users have no indispensable reason to choose them.

Myth 2: Crypto fundamentalists mistakenly believe that the social products brought about by crypto technology have revolutionized communication, when in fact, there have been no changes at the communication level (such as from text to voice to video). Instead, there are more micro-innovations based on existing functionalities (like DID and social graphs), rather than a paradigm shift. Moreover, these micro-innovations are more suited for doomsday survival players in the digital world rather than the general public.

Myth 3: Entrants from Web2 believe that by leveraging their excellent Web2 products and monetizing the mechanisms, they will attract a large user base and become loyal fans. In reality, they can only attract opportunists. This is because monetizing users' behaviors shifts their attention from social experiences to monetary incentives, and these monetary incentives are limited (after all, there is no continuous cash flow). Thus, over time, this leads to products stagnating in a cycle of decline. Monetization schemes can only serve as auxiliary operational methods to stimulate users' already strong willingness to pay, rather than generating a willingness to pay out of thin air.

Therefore, Web3, whether in terms of technology or business models, cannot create a set of social products suitable for the general public from scratch. However, this does not mean that Web3 social has no future. After eliminating various myths, the viable paths seem to be only two.

Either, like Farcaster and Telegram, seriously nurture a crypto community product first, then support some Web3 functionalities in the form of plugins, allowing the crypto community to naturally generate various wealth effects.

Or, like ENS and Lens Protocol, continue to explore innovative middleware at the protocol layer. Although it may seem of little use at this stage, it can serve as a technological reserve. In the future, it may be integrated into large Web2 social applications as plugins, leading to new interaction models and potentially giving rise to new application scenarios (such as new credit assessment mechanisms derived from ENS).

This article initially aimed to explore what Web3 Social can do, but the findings suggest that understanding what it should not do may be even more important… However, in the short to medium term, it is clear that focusing on crypto communities is the more certain path.