Foresight Ventures: Tear Down the “Walled Garden”, A paradigm shift in Web3 Social Network
What we need are not Web2 copycats, but more crypto-native approaches for innovation. We believe the true paradigm shift for Web3 social networks will include five themes: social graph, decentralised identity, privacy, composability, and tokenisation. It will be a vigorous transition from platform-centric apps to user-centric protocols & Dapps.
Web3 social network can be divided into four layers: data layer, protocol layer, privacy layer, and application layer, of which protocol layer will be the core. We suggest paying attention to protocols and data networks that can sustainably attract users to generate new relationships, identities, and certificates, as well as Dapps that can build up a long-term profit-sharing tokenomics with their community. Moreover, the social relationship formed by Soul Binding Token (SBT) may be able to fully capitalize on protocol composability and decentralized identity.
A paradigm shift in Web3 Social Networks
In Web2.0 each of us lives in “walled gardens” created by tech giants. The longer users stay in the “walled gardens”, the better the garden know about us. However, once we decide to move to another garden, we must give up all social relationships and data.
This situation is about to change in the Web3 world. With permissionless and immutable blockchain technologies, all actions generated by the user on the chain will be recorded in the block, and such data will only and completely belong to the user.
We believe the paradigm shift for Web3 social networks will be a renaissance, a vigorous transition from platform-centric apps to user-centric protocols & Dapps. The narrative of the Web3 social network includes the following themes: social graph, decentralized identity(DID), privacy, composability, and tokenization.
1.1 Social Graph: Giving Back Ownership to users
- In Web3, our social graph will no longer be monopolized by any company and will be stored entirely on-chain.
Just as the movie “Ready Player One” depicted, we may be able to maintain all of our social relationships across different apps and products. For example, you can play Warcraft with your Twitter friends, and you will also know what new NFT your friends have bought recently. One can even find a soul mate through the algorithm recommendation system.
- However, social graph data is not easy to obtain.
Forming a comprehensive social graph firstly requires multi-source cleaning, association, and collection capabilities. Moreover, users tend to manage private keys with prudence, which means interactions with wallet addresses are not that frequent. Therefore, user relationships cannot be analyzed purely from on-chain behavior, additional social information is still stored on off-chain servers. Finally, We also need to go one step further and encourage users to form generic relationships in Web3, by developing more product and incentive programs.
1.2 Identity: Traceable and Pluggable Dencentralized Identity
In web1 and web2, we need to go through a lengthy process to prove that we own the account. In Web3, this could be achieved by simply verifying the wallet’s private key.
Dencentralized Identities(DIDs) will probably be the most important asset for Web3 users. The transparency and immutability of the on-chain chains establish the cornerstone for trust, and interoperability among Dapps ensures the composability of such identity. Whether it is personal reputation, NFT ownership, Lending&borrowing, Diplomat, License, Passport, etc., they can be translated into on-chain information that users have full control over. Users can then access all Dapps through a unified identity protocol.
- With such DID, new projects can easily target potential high-value contributors for airdrops.
- For social Dapps, DID can natively help establish social relationships. For example, NFT groups can only be joined by Punks or BAYC holders.
1.3 Privacy: Information Authorization, Privacy Computing, and Private Transactions
In Web3, the data belongs to users and yet is readable to everyone. Maybe you might feel that there is no privacy at all?
We can think of solutions from three aspects：
- In the application layer, there are two approaches: multiple accounts and information authorization. Firstly, different wallets can have different identities so switching to another identity could be as simple as double-clicking your mouse. Secondly, since a DID corresponds to multiple addresses, multiple accounts may not work as intended. In this case, users should be able to configure their privacy settings in social graph or DID protocol to determine which part of the information can be read publicly and which part needs to be encrypted.
- In the computation layer, privacy-preserving computing protocols can be introduced so that data can be safely circulated in an “available but invisible” way. At present, the main privacy technologies include Zero-knowledge proof, Multi-Party Computation, Trusted Execution Environment (TEE), etc.
- At the data storage layer, privacy concerns become more complicated. Because the immutable and open nature of blockchain contradicts privacy. Once data is uploaded to the chain it will be visible to all, and encrypting all transactions is obviously very expensive and time-consuming. So the mid-way solution is likely to be allowing the user to choose in advance, which part of the data needs to be encrypted in the first place(e.g. StarkWare’s Volition) and stores this part of data directly off-chain.
1.4 Composability: Composability is to software what compounding is to finance
Composability will put cryptocurrencies at the forefront of revolutions and open up an infinite number of possibilities.
We believe “composability” should have the following key elements:
- Protocol composability: this refers to the ability to “take assets or data generated by one protocol to build on top of other protocols.” Such a combination makes one product the starting point of the next round of innovation. For example, a combination of a lending protocol and a social protocol leads to a”social credit” project.
- Data composability: New product no longer needs to accumulate user data from scratch. The decentralized database(e.g. Ceramic) stores the user’s identity, social graph, and chat history in a unified data model that allows for easy access and native interoperability in Dapps.
- Identity composability: Unlike Web2 where identities are isolated and stored on a centralized server, Web3 DID can be read and authorized access to all Dapps, ensuring composability of user identities on-chain.
- Detachability: Users should have the right to authorize access to certain Dapps and share only the part of the information they are comfortable sharing. Such authorizations can be canceled at any time to prevent personal data from being abused.
1.5 Tokenization: come for profit, stay for the network
If Web2 users “come for the tool and stay for the network”, in Web3 they will “come for the profit and stay for the network”.
There are many interesting profit-sharing models in Web3 projects:
- Fan Token: Rally allows creators to issue fan tokens. As the creator gets more popular, the value of the fan token also rises, and creators and token holders all profit from this.
- Tokenization of artworks: Mirror helps authors mint an article into NFT and start crowdfunding. Whenever these NFTs are sold, a certain percentage of the sale fee is returned to the NFT holders, who can exchange a certain percentage of ETH in the pool.
- Tokenization of social relations: Lens Protocol mint users’ likes/follows/comments into NFTs, and these NFTs will increase in value in relation to the popularity of the creator & the post; And based on such a relationship, it naturally provides good soil for the community. Atem Network is connecting the community through NFT, and users can discuss, trade, and govern the NFT-based community.
However, in this ecosystem, we can observe several common problems:
- The vast majority of creators only have a few fans and get few rewards. Most of the rewards or NFT crowdfunding have flowed to the top projects, and most money flows to those who don’t need it.
- The gas fee for NFT minting is too high. The income for average creators or users barely covers the gas fee. The solution for NFT-based projects in the future is likely to be moving to L2 to reduce costs.
2. Web3 Social Network Landscape
We believe Web3. 0 social network can be divided into four layers: data layer, protocol layer, privacy layer, and application layer.
2.1 Data layer
The data layer includes decentralized data networks and databases, such as Arweave, IPFS, Ceramic, Kwil, etc., which are used to store user on-chain identity data, and social relations.
At the moment, some user data is still stored in centralized servers such as AWS. With more user moving to web3 social media, decentralized databases will usher in a broad space for development.In the long run, the data storage is likely to adapt unified data models to facilitate interoperability among Dapps.
Ceramic is a decentralized, cross-chain database service that can manage dynamic content data based on IPFS, and has built a dynamic public chain ecosystem (Ceramic Network).
- Ceramic stores data in streams which allows for real-time modification.
- Ceramic provides a powerful built-in DID and IDX cross-chain identity protocol. At present, several social projects have been developed on top of Ceramic, such as the social graph CyberConnect, the Web3 Twitter Orbis, the IM platform The Convo Space, and so on.
2.2 Protocol layer
The protocol layer mainly includes DID protocol and the social graph protocol. They are the infrastructure of Web3 social networking. We believe that this layer will be the core layer of the social network for the following reasons:
- No matter which social Dapp the user uses, they all need a social graph and DID.
- In the long run, the protocol layer will have a strong network effect.
- Both the social graph and the DID are in the early stages of development. On the one hand, the industry has not yet formed a unified standard. On the other hand, users have little understanding of these concepts. The industry landscape is still unclear, bringing a lot of investment opportunities.
Moreover, in order to build an Internet that allows for free speech, we need protocols, not platforms. As discussed in the article “Protocol, Not Platforms”, we see that protocols surpassed all the existing company structures and are building a new world for us.
2.2.1 Social Graph
Popular projects in the social graph include CyberConnect and Lens Protocol, here’s a brief comparison of the two:
- CyberConnect aims to be the standard data layer for developers to access, aggregating on-chain and off-chain data. Developers can interact with social graphs through API calls.
- CyberConnect is a lightweight and pluggable social graph, and it now has 1.4 million+ registered users, and 70+ projects have achieved API access.
- However, CyberConnect only provides limited functions other than indexing data. Meanwhile, the cost-free nature of the project may generate a large amount of redundant data in the access, resulting in a decrease in the quality of the social graph.
- By transforming social relations into NFTs, Lens encourages users to generate more Web3 native social relations; at the same time, it builds its own protocol standards.
- Advantages of Lens:
1. It has better composability than CyberConnect as it defines its own smart contracts. Conversely, CyberConnect is an IPFS-based protocol, which is less composable.
2. Lens help users to mint NFT for their social relations which posses a strong monetization potential.( e.g. The floor price for Lens Profile NFT had been 10x within 30 days of launch.)
3. Compared with Deso social network**,Lens protocol has a more flexible open-economy model,** not restricting the Dapps to one single token, which may be able to create network effect more easily.
- Limitation of Lens:
- User experience. It is based on the polygon smart contract. Every interaction needs the user to prove. Such experience is not smooth enough for social product.
2. In the long run, Lens also needs to build an App-specific chain or move to L2 so as to control the gas fee.
- Backed by the Aave team, Lens Protocol tries to build its own ecosystem. Overall, its ecosystem is developing pretty fast. In the recent hackathon, 10 projects were shortlisted for winners, including Phaver(Share-to-earn Dapp), Lenster (Decentralized BBS Forum), Clipto (Video creation platform) etc.
2.2.2 Decentralized Identity DID
Amber Group outlined the DID ecosystem in November 2021 as follows:
DID projects can be roughly divided into four categories: off-chain identity (KYC), on-chain identity, on-chain credit scoring, and on-chain credential. It is worth emphasizing that since the current mature form of DID is not yet clear, the following classification does not mean that DID can be subdivided into four tracks or modes. In the future, it is likely to be a whole with various components.
a. Off-chain identity(KYC)
Suppose a person is an engineer at Google who graduated from Stanford University, and he has two apartments in Silicon Valley. If the above information can be authenticated and linked to a wallet address, then these off-chain social records will also provide backup for his social activities, lending, and other activities on the chain.
BrightID is a social identity network that allows you to prove that you’re only using one account. It’s the holy grail of digital identity. It currently has more than 57,000 users. Users need to make an appointment for a Zoom video conference and perform the unique identity authentication of BrightID through face recognition and verification by the verification officer.
Verite was launched on May 10 by Circle, the issuer of UDSC, in which KYC is one of the keys to its identity verification. The specific KYC details will be further disclosed soon.
b. On-chain Identity
On-chain identity projects ****do not pay attention to the user’s offline information, but use the concept of “digital identity” to aggregate users’ on-chain behavior.
Unipass aims to achieve the aggregation of on-chain identities: through a Unipass ID, users can link mailboxes, and multiple ETH addresses, and connect to the social graph (CyberConnect), information feeds (RSS3), and other protocols, becoming the “One Pass” for users in Web3.
Spruce is a digital identity authentication system whose suite of products provides support for user authentication, credentials, and storage, providing decentralized access control of data and interoperability between Web2 APIs and Web3. Binding with Web2’s existing platform account is undoubtedly a very good identity enhancement solution for some people who already have certain achievements and influence in Web2.
c. On-chain Credit Score
The goal of on-chain credit scoring is rather simple — to provide more convenience for Defi by credit score ratings.
By issuing “DeFi Passport”, the creditworthiness of each DeFi Passport holder’s on-chain address is quantified based on the credit score of each DeFi Passport holder. Compared with the first two types of DID projects, ARCx focuses more on the user’s “digital financial identity”, and uses more of the user’s on-chain transaction data rather than their social behavior data.
The goal of such projects is to encourage users to participate in activities held by different organizations and issue on-chain certifications to them.
Technically Project Galaxy is not an identity protocol, but a credential network. After users connect to the wallet, a “Galaxy ID” will be generated, and digital certificates will be issued to users according to their historical behaviors, such as “Uniswap Trader”, “OpenSea Trader” and so on. These certificates are like various professional qualification certificates in the real world, and they will play a role in some specific scenarios.
2.3 Privacy layer
Privacy-Preserving computing technologies refers to technologies like zero-knowledge proof, Multi-Party Computation(MPC), and Trusted Execution Environment(TEE). Some well-known blockchain privacy computing networks are Oasis Network, PlatON, Phala Network, ARPA, Aleph Zero, Findora, and Deeper Network.
- The use-case of private computing networks is relatively limited, as they are currently rarely adopted by projects, thus, technologies are still immature.
- The outbreak of social networking demand may win more users, but the investment priority for privacy may not be as high as in other layers. Because a user may only have a small amount of data that needs to be encrypted, it also needs to meet the three preconditions: increase in social demand+ increased awareness of user for privacy + consumer’s willingness to pay for private services.
2.4 Application Layer
- Social media applications are likely to onboard more people from web2.
- At present, there is still no killer Dapp in this layer. The main problem is many Web3 social Dapps only have rewards and lack consumption for tokens. It is difficult for their tokens to circulate in the economy, causing high selling pressure.
- We believe that there will be some novel business models in the future, such as:
- NFT-based social applications. Only verified NFT holders can join to communicate with each other, and users with high credit ratings can directly contact NFT buyers. That’s where p2p transactions, swaps, and NFT lending could possibly happen. A good example is Atem Network, which forms a community through NFT, and users can discuss trade, and jointly govern the community.
2. Cross-chain IM application. Users can manage their friends’ relationships across Gamefi, Dao, and NFT communities. They can also know which games their friends are playing and which NFTs they are buying via status updates.
3. Gamefi business model. Phaver is a good example of this, it is the leading share-to-earn Dapp built on top of Lens protocol. Users will be rewarded by improving others’ experiences, such as generating high-quality content, choosing quality content, and contributing to the community; they will also consume tokens to improve their own experiences such as private chat, premium content, and buying more visibility for your post and mint NFTs. This appears to be very effective, helping the project to easily hit 5K dau,3k daily post in stealth mode.
4. Reputation community based on Defi experience or investment achievements. Users can display their achievements on the profile page, and creators with great investment history can produce high-quality content, and issue fan tokens themselves.
5. Dao-based social media Dapps. Such Dapp can rely on community DAO for governance, content review, and user registration. All revenue generated by Dapp will also be distributed to the DAO treasury and then distributed to each contributor according to community proposals.
- Web3 social network is still in its early days, and the competitive landscape is not yet clear; Emerging business models such as NFT-based social relations and fan economy deserve long-term attention.
- Application layer: pay attention to social Dapps with profit-sharing functionalities, such as mirror. The key is whether the token comic is reasonable enough to retain users and high-value creators.
- Protocol layer: pay attention to the protocols and data networks that can attract users to generate new relationships, identities, and certificates. Such products are the infrastructure on the one hand and are also able to accumulate a large user base on the other.
- Social network exploration based on SoulBound Tokens: The main solution of today’s social protocol is still around NFT or off-chain database. The former may have too strong financial properties, while the latter may be less composable because it is not on the chain; social relationships formed based on SoulBound Tokens may be possible to take into account the composability and weak financial attributes, and the core value of the social token on the chain can be returned to the relationship to prove itself, and then become a truly effective social credential.
https://mp .weixin.qq.com/s/2OrIFXXTeWAKwbvl3dhlIA Decentralized