Foresight Ventures: How We Help Design Product Model for Web3 Social Media

Alice@Foresight Ventures

TL;DR

1. The Crypto world is craving its own platform and set of rules for decentralized social media. Phaver is providing such a stage where web3ers can support their favorite content & creators with real tokens in their hands, and where all community builders are fairly rewarded.

2. We see very strong trends in user growth, community building, and content generation through MVP testing, but it also shows the product design has much room for improvement.

3. We made two major iterations for the product design, trying to achieve a balance on the network effect, user privacy, and token utility.

1. Why invest?

The first time I contacted the Phaver team was in May, I was attracted by the aesthetics and smooth experience with the mobile app. I approached Tomi and Joonatan, the co-founders of Phaver, and we had our first intro call. Crypto is in its early days, yet the team has impressed us with its community-oriented initiatives, product-oriented approach, and strong executive power.

Founding team has background that combines paid advertising tech, fintech and traditional finance as well as blockchain:

• Joonatan spent his first 10 years of his career at Google and Smartly.io
• Tomi at Goldman Sachs, Alibaba and blockchain companies and technical co-founders were also part of starting the first automated crypto exchange in Finland.
• At the time of the investment the team was already more than 10 people and spreading out globally.

What impresses me most is its innovative gameplay — content staking, which allows consumers to vote for their favorite content with their tokens.

Content staking has several interesting characteristics:

• It allows more medium and long-tail creators to gain attention from the public, instead of the top accounts with millions of fans.
• Creators who are really popular can benefit and drive value from such attention. The revenue of content staking goes directly to the creator her/himself instead of a centralized platform as in web2 social media.

The Crypto world is craving its own platform and set of rules for decentralized social media. Phaver is providing such a stage where web3ers can support their favorite content & creators with real tokens in their hands, and where all community builders are fairly rewarded. Once that consensus and momentum are shaped, we believe it will be a revolution from the bottom up, a native revolution for web3 social media. So, we decided to invest in this project and onboard ourselves to this large web3 social experiment, hoping to start a new journey.

2. MVP Testing: we succeeded, but not completely

From May-July was the time of product testing, we refined the MVP, initiated Lens Whitelist campaigns, and co-marketed with many communities and brands. Phaver mobile app also completed two feature product updates during this period.

• We got a pretty good trend from user growth and content generation, in July Phaver amounted already to 55% of all the posts made on Lens Protocol that month.
• The community is building up step by step, as weekly returning users over the summer doubling roughly every two weeks and still continuing to grow, exceeding 20k in September.
• At this stage, we did not have any tokens yet but rather rewarded early members with points (which could be converted to tokens later). Even so, users’ enthusiasm is still very high, users making over 400k posts in September and casting almost 2.5M upvotes on their favorite posts.

And with the right guidance and proper incentive, the quality of the content was gradually improved. In fact, we’re happy to find out the mechanism of Phaver is interesting, if the creator’s content becomes worse, then someone will be willing to retweet or create better content, thus they can attract more stakes, arbitraging the value of this ecosystem. In other words, the market automatically adjusts in a balanced way to make the content better and better.

As said Rome wasn’t built in a day, we realized that MVP showed there are some issues.

• Anti-cheating mechanisms need to be refined soon. Dishonest users may create high inflationary pressure for tokens. In other words, we’re punishing honest users by diluting the token value. We also need to refine reward rules and market plans so that everyone can participate better and fairly;
• We need more utility for the token, so that it will circulate and facilitate the growth of our ecosystem. Community members can create value through Phaver and keep the value in the ecosystem instead of extracting the value and taking it out of the ecosystem.

3. Product Design 1.0

Here are the main ideas for Product Design 1.0

To build up a fun and sustainable ecosystem, Phaver will provide two systems to reward members’ contributions to social reputation, community engagement, and capital input.

System 1: SBT DID system

Each user will be given a unique SBT DID base on third-party ratings, in-app scoring, etc., which will correspond to different levels and in-app benefits. This allows everyone to capitalize on their social reputation in and outside of the ecosystem.

• The STB DID is a non-transferable NFT that aggregates all user attributes.
• Users can continuously level up their SBT roles by completing tasks and contributing to the community.

System 2: NFT Pass

Phaver issues NFT Pass to unlock more gameplay and monetization opportunity for community members.

• By purchasing NFT Season Pass, they can unlock attractive premium benefits including:
• Higher returns: NFT Pass holders get 5–10x returns than non-Pass holders
• Lucky draw: NFT holders ranking in the top 50% (by SBT level) in the leaderboard are eligible to win a special prize on a daily basis

1. Bronze NFT Pass-3000 USD per winner, 5x return
2. Silver NFT Pass-4000 USD per winner, 8x return
3. Gold NFT Pass-5000 USD per winner, 10x return

• Premium benefits: read & create in premium channels, NFT-gated community, potential airdrops/whitelists, etc.
• Each NFT series will be limited and can be traded in Opensea

4. The Problems

After discussions with the community, we believe that tokenomics design 1.0 is actually not ideal. Main concerns are:

• Many countries have strict regulations on mobile apps containing lucky draws. The app store also does not allow for features that have gambling features.
• Web3 infrastructures are not yet perfect. Dynamic SoulBound NFT is hard to be put into practice, as there no such mature solution yet.
• Anti-cheating problem mentioned above has not been solved

5. Product Design 2.0

For Product 2.0, we decide to keep the level system to reward high-quality users. Meanwhile, to ensure community diversity and network effects we also adopted the principle of minimum intervention. There will be a simple and fair rule to measure users’ level based on their behavior and contribution to the ecosystem:

• Level 1 users: need to complete email verification to participate in community activities such as post, like, reweet, emoji reaction.
• Level 2 users: need to complete simple verification (On-chain Reputation/Onchain credentials/NFT Asset/Token Value) to unlock content staking, and exchange their points for tokens (In this way, we can avoid the risk of tokens being farmed by fake accounts.)
• Level 3 and Level 4 users: utility NFT or governance token stakers. They will have premium benefits such as posting content in premium channels, boosting exposure, higher staking rewards etc.

5. Our Learnings

We identified the major dilemmas that Web3 social Dapps are facing:

1. Problem 1: token design. Many products simply encourage behaviors such as posting, liking, sharing, and following. Users are accustomed to farm-and-sell, creating a huge selling pressure for the token.

-Solution: Differentiated rewards. Phaver differentiates reward efficiency through a level system, forming a gamified ecosystem, where everyone is could network and share contents they love, while not being able to calculate the accurate returns on such behavior. Members are expected to be rewarded with more tokens if they contribute more to the community and have a higher reputation level, not just simple token farming.

2. Problem 2: Creator incentive. They do not have the motivation to keep producing quality content

- Solution: Subsidizing the high-quality content creators through content staking, rewarding the top-ranked creators and their followers.

3. Problem 3: Content distributions

- Solution： Phaver encourages users to vote for their favorite content and thus, naturally creates quality information flow and optimizes our reading experience.

In the process of trying to solve these problems and designing effective product model, we also have some learnings of our own:

1. Tokens can be a great and synergistic way to kick-start the network, but incentives need to be very carefully aligned to achieve a balance between inclusivity and abuse resistance.

2. Entrepreneurship is a combination of theory, art, and practice. It is necessary to be both idealistic and realistic and follow the most practical way of product planning.

3. Minimum intervention. The team should always listen to the voice of the community, and serve in a guidance role, just as the Ethereum Foundation is for Ethereum. We set the ground rules for entry, and leave the rest to the community. In this process, it’s important to ensure that high-value contributors are fairly rewarded.

Building a new idea is not to be an armchair strategist, but to make agile testing by put innovative ideas into practicum, through minimal viable products. Maybe Phaver is still midway to success, but with a great team and community, we are confident that we can build the most exciting and native web3 social media.

About Foresight Ventures

Foresight Ventures is dedicated to backing the disruptive innovation of blockchain for the next few decades. We manage multiple funds: a VC fund, an actively-managed secondary fund, a multi-strategy FOF, and a private market secondary fund, with AUM exceeding $400 million. Foresight Ventures adheres to the belief of “Unique, Independent, Aggressive, Long-Term mindset” and provides extensive support for portfolio companies within a growing ecosystem. Our team is composed of veterans from top financial and technology companies like Sequoia Capital, CICC, Google, Bitmain and many others.

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