Web3 Social Myths: Failing to Distinguish Between Social and Community, and the Disastrous X to Earn Model

The entire Web3 industry is filled with layman assumptions about the social track.

Written by: Beichen

This is the 16th article by Whistle, discussing the Web3 Social track and the limitations of monetization.

Over the past year, the Web3 industry has emerged from a sluggish bear market. Although a true bull market has yet to arrive, there are increasing voices predicting the coming of a Social Summer. Especially recently, Telegram founder Pavel Durov was arrested at a French airport due to multiple criminal charges including fraud, money laundering, and terrorism, which has further drawn attention to social products.

This is not hard to understand: the crypto native technical route seems to have reached its end (after all, the necessary infrastructure is already in place), but there is still no sign of mass adoption. The social track, in theory, is the easiest to leverage massive users and could potentially evolve into an ecosystem. As a result, 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.

Although I am also optimistic about the social track, I have to voice a harsh opinion—the entire Web3 industry is filled with layman assumptions about the social track, with misunderstandings as deep as those about collectibles, RWA, and DePIN.

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

1. Social and Community

Whether it's Web3 Social, DeSo, or SocialFi, the concept ultimately comes down to providing services to real users, so we must clearly distinguish whether these services are for social or for community. Most of the time, people seem to mix the two, especially in the Chinese context, where they have almost become synonyms. But in fact, social and community are two things at different levels.

1.1. Social: Starting from Communication

Broadly speaking, social products start from social interaction, which actually more accurately refers to social interaction, and social interaction starts from communication.

Social is a micro-level exchange behavior, which can occur between two people or in groups composed of many individuals. The way to achieve social behavior is communication, so social products must start from 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 the other party could even see the letters you were typing in real time. Since then, various communication software has continued to iterate. Today, the core communication functions we use daily are provided by online chat applications such as WhatsApp, WeChat, Telegram, and various email services.

So why do users keep switching communication software? In fact, behind every communication software that goes viral, there is an irreplaceable reason driving users to use it. In summary, there are only three: either it's free, it helps you find the right people, or it's censorship-resistant.

Tencent is a successful case driven by being free. In 1999, when the three major telecom operators had not yet launched SMS services, OICQ (later QQ) bypassed the telephone network and allowed users to send messages for free, although it was inconvenient to send and receive messages on a computer. This gave the three major operators, who only launched SMS services in 2000, an opportunity. Each SMS cost 0.1 yuan, which later paved the way for WeChat's rise in the era of smartphones.

But why was the opportunity seized by WeChat and not the more mature QQ? Firstly, because mobile QQ in the early days of mobile internet was just a port of the PC product and did not provide as good a user experience as WeChat, which was built for mobile. More importantly, WeChat was the first to launch voice messages, voice calls, and video calls, completely replacing SMS and call services on mobile phones.

In fact, following the logic of being free, the next communication software driven by free should be free satellite calls and satellite internet.

Success cases driven by finding the right people are various dating apps, such as Momo for strangers, Blued for sexual minorities, and QingTengZhiLian for highly educated matchmaking... Success cases driven by censorship resistance are Telegram, Signal, etc.

Clubhouse combined both finding the right people and censorship resistance, which made this otherwise common voice chat software highly sought after when it first appeared, because there were influential people and bold topics to discuss.

In short, social interaction is the most basic social behavior, and the most basic function to achieve social interaction is communication. No matter how complex a social product is, its core function starts from communication, and then new services are continuously integrated, evolving into community products.

1.2. Community: Social Media and Social Networks

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

Note, a community is not a simple collection (many people think of a community as "just creating a group and chatting every day"...), but rather all members support each other out of common demands (such as interests, vision, etc.). This means that members must contribute information, resources, etc. When the resources demanded by members exceed those produced, the community declines. It's like cancer cells, which only replicate and consume energy until the host dies.

Therefore, building community products is much more difficult than social products—it's almost a religious issue. Addressing a pain point in communication (such as free voice chat in the past) can make a product popular for a while, but the subsequent performance of most social products has proven that retaining users is much harder than attracting them.

According to the way community (community) products retain users, they can be divided 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 1973 on the PLATO system (the same year the first online chat system, Talkomatic, was created). Notes already had the prototype of BBS, and later various forums, Tieba, blogs, and other community products all evolved from this. They are all interest-centric, so they continuously accumulate user-generated content (UGC), and eventually evolved into today's Twitter, Weibo, Instagram, Xiaohongshu, etc., in the mobile internet wave.

Relationship-centric social networking services are actually the "communication products driven by finding the right people" mentioned earlier, but only when the product is actually used as a contact list does it count as a true social network. For example, WeChat for existing offline acquaintances, Momo for strangers, LinkedIn for professional networking, etc.

1.3. From Single Function to Comprehensive Platform

However, even after sorting things out to this point and strictly distinguishing between social and community, the definition of social products may still be confusing, because today's social products often no longer have just a single function but integrate functions of different levels and dimensions.

This is the root cause of all confusion about social products—focusing only on the most superficial functions and playing with puzzle pieces, without being able to restore the real driving force and evolution of the product.

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

Later, it supported voice and video calls to strengthen its communication advantage, and successively launched "Moments," "Official Accounts," and "Channels," developing into social media on top of the social network. The addition of payment functions even caught Alipay off guard.

This approach can also be used to analyze X, Facebook, Telegram, or even Douyin. However, almost all analysis reports on Web3 Social today seem like a user who only started using WeChat in the past two years analyzing WeChat—mixing various functions together without understanding the real focus of the product. Entrepreneurs guided by this thinking simply copy another WeChat, starting with a comprehensive set of features, without considering how to acquire and retain real users for those features.

Therefore, this article could also analyze by different communication methods, content types, social relationship types, and media types, making a nice table and using internet jargon to analyze those randomly combined results (such as "an encrypted app for Web3 practitioners to communicate, supporting voice calls and live streaming with copy trading"), to appear very professional in research, but in fact, it offers no practical guidance.

2. Web3 Social Panorama

After so much groundwork on social, it's finally time to talk about Web3! Web3 Social is much more complex than the various internet social products mentioned earlier because the entire internet protocol and blockchain protocol are fundamentally different.

2.1. Model Hierarchy: Internet and Blockchain

The internet can be divided into 7 layers according to the OSI model, and developers only need to consider the top application layer. However, blockchain has not yet been finalized, so it is relatively more complicated. Here is a reference layered model, which will be used for analysis.

In the blockchain world, if the blockchain network is layer1, then the internet is layer0, serving as the underlying communication infrastructure. The blockchain network can also be subdivided into different layers, such as the network layer, data layer, consensus layer, and incentive layer. Although there are different layering schemes, the mainstream approach is for public chains to package them together, so we can directly discuss public chains.

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 end products, but key components that implement minimal functions, some executed on-chain as smart contracts, others off-chain as middleware.

Since blockchain is a shared data layer, these smart contracts are open and can be used an unlimited number of times. Therefore, in theory, later developers can combine and optimize these smart contracts and middleware to build new applications.

The problem is that, at present, both smart contracts and middleware at the protocol layer are still very lacking (the few innovations are concentrated in DeFi, with no revolutionary products in the social track), so the possibility of building products suitable for mass adoption at the application layer is not high.

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

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

2.2.1. Bottom-Up Approach

The bottom-up approach has two types: one is identity management infrastructure built around accounts, and the other is social graphs built around content.

In the Web2 world, the most important account is email; in the Web3 world, it's DID (Decentralized Identifier), which users create and manage on the blockchain themselves, enabling private interactions with other applications.

The most typical example is ENS, a decentralized domain name system built on Ethereum, which can be used by individuals, organizations, or even devices to create and manage their own identity/digital identifiers (though the earliest on-chain domain name system was Namecoin, forked from the Bitcoin network in 2011).

However, the problem with these DID projects is that, apart from being used as wallet domains, there are no truly rigid application scenarios...

As for social graphs built around content, they allow users to put their social data on-chain, such as profiles, posts, follows, etc. The most typical example is Lens Protocol, which tokenizes and NFT-izes users' social data and behaviors, allowing developers to build new social applications on top of it. However, no truly vibrant social application has yet emerged.

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

2.2.2. Top-Down Approach

The top-down approach is simple: take mature social products and adapt them to the blockchain, but there are also two specific types.

One is to first build a mature Web2 social product and then gradually add Web3 modules. The earliest and most successful example of this was Bihu, which later shut down. Many similar projects emerged, especially in 2022 with the X to Earn model inspiring SocialFi, launching mechanisms such as mining by posting, commenting, or chatting, but almost all have now died out. This is because the SocialFi model is inherently untenable, as will be explained in detail later.

Currently, among all social products transitioning from Web2 to Web3, the only one performing well is Farcaster, which is very restrained, does not adopt the SocialFi model, and instead focuses on cultivating a crypto community. Web3 features exist as plugins. It's important to note that crypto communities naturally have a wealth effect, so a group of memecoins represented by Degen have naturally emerged (if listing was as easy as issuing tokens, Xueqiu would crush all big companies).

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

The confusion lies in the fact that all modules appear to be Web3, and the functions are comprehensive, but if you take a step back, you'll find that it's actually just expressing a mature Web2 social product entirely in a Web3 way (such as using cryptographic signatures and distributed systems), so there is no essential difference from Web2 products.

For example, Ceramic and UXLink seem to span the entire blockchain technology stack from the application layer to the infrastructure layer, covering everything from underlying technology to user interfaces, forming a very complete Web3 social ecosystem. It's like building a wooden pavilion out of reinforced concrete—possible, but unnecessary, since you could design new forms of architecture based on the properties of reinforced concrete.

2.2.3. Limitations of the Two Product Paths

In summary, whether it's identity management infrastructure built around accounts, social graphs built around content, or simply expressing mature Web2 social products entirely in a Web3 way, all these approaches seem more suited for digital world doomsday survivalists than the general public. As a result, they are often "respected but not understood," making it difficult to produce a mass-market product along these lines.

Perhaps we should put aside fundamentalist biases and re-examine the vitality of Web2.5 products like Farcaster, which brings us back to the ability to build social and community products, as mentioned at the beginning of this article—the real skill lies outside of technology.

3. X to Earn and Its Applicable Scenarios

However, when it comes to Web2.5 products, imagination is almost monopolized by "Web3 versions of XXX," such as Web3 TikTok—Drakula, Web3 Instagram—Jam, etc., and the Web3 part is only reflected in the monetization of the business model, that is, Fi, or what we are more familiar with as X to Earn.

3.1. The Essence of Monetization Is a Points Mall

Monetization seems to be the only magic weapon for Web3 to transform all internet products, whether it was the "token school" and "chain reform" popular in 2017, or the "X to Earn" trend that started in 2021. Essentially, it's all about incentivizing user retention by sharing profits.

In fact, the internet field already has a mature points system, using the "do tasks - earn points - redeem goods or rights in the mall" model to increase app user activity, but it's only an auxiliary operational tool. After all, money doesn't appear out of thin air. If the wool can't come from the sheep, it has to come from the pig. In normal business models, such subsidies face cash flow bottlenecks in the long run.

Only Ponzi schemes can break the cash flow bottleneck, directly developing a product dominated by the points system and letting newcomers take over. Around 2015, there were many middle-aged women in third- and fourth-tier cities promoting various apps that supposedly made money but required a membership fee upfront.

So, the monetization of most Web3 products is essentially the same as the internet points mall, except that the points are not exchanged for goods bought with real money, but for market cap expectations on the secondary market.

3.2. Challenges of Monetization Schemes

Of course, we shouldn't completely deny monetization; it just has specific applicable scenarios and is not suitable for most social and community scenarios.

The first challenge is actually a management bottleneck—with the current level of performance evaluation, it is impossible to accurately identify users' effective behaviors, so appropriate incentives cannot be given, and the end result is only to attract "airdrop hunters".

Even if the rules are as precise as how many minutes of retention per day or which tasks are completed, they will be gamed by bot farms, and real users will be less competitive than bot accounts. Almost all "X to Earn" projects have failed to avoid this.

Moreover, even if the project team can distinguish users' effective behaviors and develop reasonable incentive schemes, it is inherently unsuitable for social/community products, because there is also a psychological challenge—monetization shifts users' motivation 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 is itself a reward for users, but the SocialFi model constantly shifts users' attention from pure social experience to monetary incentives, and the end result is that users lose interest in the product itself.

3.3. The Absurdity of SocialFi

If we develop a dating app according to the SocialFi model, quantifying and rewarding couples for daily activities such as chatting, sending flowers, kissing, hugging, etc., the dating experience for couples using this app would be extremely dull.

If you also think this dating app is absurdly designed, that's exactly how SocialFi projects operate. The psychological over-justification effect explains the absurdity of SocialFi—monetization adds excessive external reasons to behaviors that users already have sufficient intrinsic motivation for, causing users' behaviors to be controlled by these external reasons.

If you want to monetize users' behaviors, it only applies to those with rigid payment scenarios, such as pornography, gambling, drugs, or fan economy. Users already have a strong willingness to pay, which can provide a continuous cash flow, so using monetization as an auxiliary operational tool can be the icing on the cake.

All current monetization (X to Earn) projects may look exquisitely designed, but in reality, they cannot bring long-term positive income and can only wither away in endless cycles.

Conclusion

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

Myth 1: There is widespread confusion between the concepts of social and community, so people only focus on the most superficial functions of products, ignoring the real driving force and evolution of the product. As a result, product design and positioning tend to create all-in-one products, and the outlook is filled with wishful thinking. In fact, users have no irreplaceable reason to use them.

Myth 2: Crypto fundamentalists believe that crypto technology will revolutionize social products, but in reality, it has not brought any changes at the communication layer (such as from text to voice to video), but rather micro-innovations based on existing functions (such as DID, social graphs), not paradigm shifts. These micro-innovations are more suitable for digital world doomsday survivalists, not the general public.

Myth 3: Newcomers from Web2 believe that with their excellent Web2 products, simply monetizing the mechanism will attract a large number of users who will become loyal fans, but in reality, only airdrop hunters will be attracted. Monetizing user behavior shifts users' attention from social experience to monetary incentives, and since monetary incentives are limited (there is no endless cash flow), the product will eventually wither away in endless cycles. Monetization schemes can only be used as auxiliary operational tools to stimulate users' already strong willingness to pay, not to create willingness to pay out of thin air.

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

Either, like Farcaster or Telegram, first seriously cultivate a crypto community product, then support some Web3 functions in the form of plugins, and the crypto community will naturally generate various wealth effects.

Or, like ENS or Lens Protocol, continue to explore innovative middleware at the protocol layer. Although it may not be very useful at this stage, it can serve as technical reserves. In the future, it may be integrated into large Web2 social applications as plugins, bringing new interaction models, and may also give rise to new application scenarios (such as new credit evaluation mechanisms derived from ENS).

This article originally intended to explore what Web3 Social can do, but after sorting things out, it seems that what not to do is actually more important... However, in the medium to short term, it is clear that building crypto communities is still the more certain path.