One Big IdeaWho Can We Trust on Social Media?
Humans are hierarchical by nature. Our instinct is to classify out of self-preservation. We are status-seeking. We look for indicators of where we stand on the totem pole of life by comparing our position to others. We are influenced and subconsciously (or consciously) mirror those we believe to be of high status. In Robert B. Caldini’s Influence, The Psychology of Persuasion, the author breaks down the six principles of influence. They are:**Reciprocation - **we hate feeling indebted. If som...
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DAOs. If you’ve spent enough time in or around someone in the space, you’ve heard the acronym thrown around. During the bull market, it seemed the “solution” to every problem was to just DAO it (you can have this one for free, Nike). DAOs, or Decentralized Autonomous Organizations, promised a future in which entities became unstoppable. Governed by smart contracts. All you had to do was set up some initial rules and let Ethereum take the wheel.Set It And Forget It GIFs - Get the best GIF on G...
One Big IdeaA Beginner's Guide to Cosmos 2.0
The Scalability Trilemma & Cosmos The perfect blockchain would be decentralized, scalable, and secure. It is decentralized to be credibly fair and censorship-resistant, scalable to handle the masses, and safe from exploitation. Unfortunately, the perfect blockchain does not exist. Instead, what we have is the scalability trilemma. The tradeoffs required to develop a blockchain necessitate deprioritizing one of these pillars to benefit the other two.Bitcoin and Ethereum have prioritized decent...
One Big IdeaWho Can We Trust on Social Media?
Humans are hierarchical by nature. Our instinct is to classify out of self-preservation. We are status-seeking. We look for indicators of where we stand on the totem pole of life by comparing our position to others. We are influenced and subconsciously (or consciously) mirror those we believe to be of high status. In Robert B. Caldini’s Influence, The Psychology of Persuasion, the author breaks down the six principles of influence. They are:**Reciprocation - **we hate feeling indebted. If som...
One Big IdeaNFT DAOs Are Terrible
DAOs. If you’ve spent enough time in or around someone in the space, you’ve heard the acronym thrown around. During the bull market, it seemed the “solution” to every problem was to just DAO it (you can have this one for free, Nike). DAOs, or Decentralized Autonomous Organizations, promised a future in which entities became unstoppable. Governed by smart contracts. All you had to do was set up some initial rules and let Ethereum take the wheel.Set It And Forget It GIFs - Get the best GIF on G...
One Big IdeaA Beginner's Guide to Cosmos 2.0
The Scalability Trilemma & Cosmos The perfect blockchain would be decentralized, scalable, and secure. It is decentralized to be credibly fair and censorship-resistant, scalable to handle the masses, and safe from exploitation. Unfortunately, the perfect blockchain does not exist. Instead, what we have is the scalability trilemma. The tradeoffs required to develop a blockchain necessitate deprioritizing one of these pillars to benefit the other two.Bitcoin and Ethereum have prioritized decent...
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Every month my boss, Troy Carter, hosts a dinner at his home in Los Angeles. These meals are filled with some of the brightest minds across entertainment and technology. Our conversations over sushi and wine have been some of the most thought provoking evenings I’ve experienced. One evening, I heard a story that completely reshaped how I think about the future of social media.
As we gathered around the dining room table, one musician told the group a cautionary tale. In 2007, when Facebook had merely 14 million users (compared to 2.8 billion today), the musician’s band had chosen to start a Facebook page. The band’s page quickly became the digital meeting ground for their community. A place not only to keep up with the band but for fans to connect with one another.
With the band leaning and engaging with their audience their page became one of the biggest on the platform. At one point they had more followers than Coca Cola (which at publishing has 108M followers). This was a win-win. For the band, their page was a way for them to reach their fans anywhere at the click of a button. For Facebook, having one of the largest bands in the world use their plucky upstart further validated the social service.
Everything was going swimmingly. Until one day. The music stopped.
The band was getting ready for the release of their upcoming album. Facebook would be central to their marketing strategy for the release and subsequent tour. However, as the band began their campaign they noticed engagement had fallen off a cliff. Each post was only reaching a small fraction of their audience. Befuddled, the band’s team went to Facebook to see what was wrong. The response they received would leave them sick.
Facebook had recently introduced paid advertisements. With the platform achieving rapid growth, brands had begun knocking on Facebook’s door to reach consumers where they were increasingly spending their time. Thus, Facebook’s algorithm was altered to maximize the impact of paid ad campaigns. Organic reach was drastically reduced and so to reach the band’s full audience they would need to spend the equivalent of a Super Bowl commercial on paid advertisements.
Jaws dropped to the floor. Nothing would ever be the same.
Facebook’s behavior foreshadowed what was to come with the maturation of social media platforms. This pattern of prioritizing growth and then extracting as much user value as possible is described by Chris Dixon in Why Web3 Matters:
Centralized platforms follow a predictable life cycle. At first, they do everything they can to recruit users and third-party complements like creators, developers, and businesses.
They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and third parties steadily grows.
When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. To continue growing requires extracting data from users and competing with (former) partners.
For Facebook, changing the rules of engagement (pun intended) was just good business. For the band? Facebook’s actions demonstrated who really controlled their audience. Being beholden to a misaligned corporation for reach left a taste in their mouth that would drive this musician into the world of web3. Editors note: Drop a comment with your best guess of who this musician and there band are!
In today’s One Big Idea we will dive into social media’s state of play and the opportunity to build a better future.
The power of social media apps today can be described by Metcalfe’s Law. Otherwise known as network effects, Metcalfe’s Law states the value of a network increases to the square of the number of users in the network.
In other words, every new user has an exponential increase on the value of the network. This increase in value then drives even further adoption and accelerates the growth flywheel. To continue with our Facebook example - more people joining Facebook, means the value of the Facebook network increases, which results in…even more people joining Facebook.
The social apps of today leverage network effects to reach scales of epic proportions. Facebook, the number 1 social app with 2.79 billion users, has over 300 million more users than the biggest country in the world (China, 2.4 billion).
This scale has positives for end users. For starters, the platforms are “free”. This is due to social media companies running strong advertising businesses enabled by having the most robust user databases in the world. Will dive into the dark underbelly of this point later but it’s worth acknowledging the most popular applications in the world do not cost a dime to end consumers.
Additionally, these social applications are largely responsible for the rise of the creator economy. With free global distribution, creators have access to would-be fans around the world. From YouTube streamers to Tik Tok comedians, anyone with an internet connection has a platform.
This scale has also enabled digital communities to thrive. Nothing is too niche to find a home when you have billions of people connected. Looking for “Genuinely Stoked Goats”? So are 176,768 other people on Facebook.
But these positives have come at a serious cost. Consumer choice, privacy, and fair compensation have all suffered as the result of misaligned incentives from centralized for profit corporations.
The same network effects responsible for social media’s massive growth has served to deter direct competition. As an upstart, you would need to convince someone your less valuable network is worth the high switching cost. Without creating a new value proposition (e.g. Tik Tok was differentiated from Instagram) its an almost insurmountable task. These networks are highly defensible moats which have stymied new social media apps from achieving success.
In addition, remember how I said we would get back to the whole “free” product benefit? Well as Andrew Lewis once said, “if you are not paying for it, you're not the customer; you're the product being sold”.
So what is being sold exactly? Your data. Social media companies sell your data to advertisers. This is used to influence not only your purchasing behavior but how you view the world. As was made famous by the Cambridge Analytica scandal, your data is the key to your psychology. Whoever controls your data then is able to influence you without your consent.
Social media companies have also used their free products to shield themselves from paying creators higher sums per user. In 2021, Facebook paid out $0.10 to content creators per user. On YouTube, the average channel payout was $405.
What’s worse is because these platforms operate as walled gardens creators have little recourse over their measly payments. These applications are not only where their audiences live but where they have spent time cultivating a following. An inability to take their audience with them means creators are left to play by the rules of these corporations, no matter how unfair they may seem.
Lastly, we sadly likely all have experience with the highly addictive nature of social media. An advertising model incentivizes applications to prioritize screen time. As a result these applications are designed to hijack our dopamine with never ending content and notifications. These dark patterns are having a real impact on our collective mental health. Feelings of social isolation, anxiety, depression, and even suicide are all on the rise. It is clear prioritizing clicks over mental health has had a detrimental impact on the psychological well being of many in society.
So then how do we solve these issues while maintaining the benefits of social media?
Most issues from today’s social media landscape can be attributed to misaligned incentives from centralized conglomerates. Value accrual is consolidated into the hands of a few platforms instead of the individuals who are responsible for their success.
A social platform built to solve today's problems would serve more as a public good than a for profit institution. Yet, you need strong financial incentives to convince would-be builders to invest their time creating these platforms. No one ever got rich creating a public library.
One proposed solution is to create interoperable protocols. Unlike platforms, protocols are application agnostic. They serve to connect ecosystems through a universal infrastructure. While mainly developed as a public good, these protocols can institute fee structures or develop token economies for transacting on the network. Ethereum itself is a protocol where value accrual is received by all participants as the ecosystem develops. Ethereum is both managed by the not for profit Ethereum Foundation and for profit developers. These groups work in tandem to oversee the chain’s development through the implementation of Ethereum Improvement Proposals (EIPs).
In his essay “hyperstructures”, Jacob defines such protocols by being:
Unstoppable: the protocol cannot be stopped by anyone. It runs for as long as the underlying blockchain exists.
Free: there is a 0% protocol wide fee and runs exactly at gas cost.
Valuable: accrues value which is accessible and exitable by the owners.
Expansive: there are built-in incentives for participants in the protocol.
Permissionless: universally accessible and censorship resistant. Builders and users cannot be deplatformed.
Positive sum: it creates a win-win environment for participants to utilize the same infrastrastructure.
Credibly neutral: the protocol is user-agnostic.
Lens Protocol is one such hyperstructure whose aim is to solve the social media problems of today by creating the web’s social graph.
A social graph is a representation of the interconnection of relationships in an online social network. For Lens Protocol, creating a social graph means building the foundation for all social apps. In this way all user data relationships are shared across the protocol. Imagine if your social profiles today were interoperable. Meaning you could sign up for a Twitter account and all your social data (people, actions) from Instagram, Facebook, and Tik Tok would already be there. That’s the idea behind creating a base layer.
To succeed, hyperstructures like Lens Protocol require vibrant application ecosystems. Today, apps like Lenster (Web3 Twitter), Alps Finance (social DeFi), and Zilly (Web3 Discord) are using the the protocol to jump start their development.
The beauty of such a hyperstructure is it’s not limited to a single application or use case. A social graph could be used to build the next Uber, Airbnb, Substack, or any other application which requires access to the social data of its users. You could see how a Lens Protocol could serve as the single sign on for one’s identity across the web.
However, web3 social has a long way to go till it’s ready for primetime. Some of the issues protocols like Lens will need to tackle include:
Cold start problem - No one likes an empty party. Protocols must convince developers to create applications, creators to develop content, and users to participate.
Wallet adoption - Web3 wallet adoption, while growing, remains in its infancy. There are 200M total Ethereum addresses and only 274K daily active Polygon addresses (where Lens Protocol is being developed).
Clunky User Experience - Because each action is represented on-chain a transaction must be signed. Actions like following and posting are throttled by the bandwidth of the platform.
Immature Incentive Structures - Social media platforms today are able to highly monetize their users because their positions are defensible. In a protocol future, applications are free to charge but users are free to exit. This will put pressure to keep fees very low. Great for the end user but a concern for developers considering making the investment.
Yet, history tells us the problems of today will be solved by the invention of tomorrow. As incumbents continue to increase their rate of value extraction, participants will increasingly feel the need to find sustainable alternatives.
Thanks for reading. Happy exploring and make it a great week.
-austin
Why Web3 Matters by Chris Dixon
Lens Protocol, Web3’s Social Platform by Blockworks (Podcast)
Hyperstructures by jacob
Lens Stats by Lens Protocol
The SocialFi chain.
Every month my boss, Troy Carter, hosts a dinner at his home in Los Angeles. These meals are filled with some of the brightest minds across entertainment and technology. Our conversations over sushi and wine have been some of the most thought provoking evenings I’ve experienced. One evening, I heard a story that completely reshaped how I think about the future of social media.
As we gathered around the dining room table, one musician told the group a cautionary tale. In 2007, when Facebook had merely 14 million users (compared to 2.8 billion today), the musician’s band had chosen to start a Facebook page. The band’s page quickly became the digital meeting ground for their community. A place not only to keep up with the band but for fans to connect with one another.
With the band leaning and engaging with their audience their page became one of the biggest on the platform. At one point they had more followers than Coca Cola (which at publishing has 108M followers). This was a win-win. For the band, their page was a way for them to reach their fans anywhere at the click of a button. For Facebook, having one of the largest bands in the world use their plucky upstart further validated the social service.
Everything was going swimmingly. Until one day. The music stopped.
The band was getting ready for the release of their upcoming album. Facebook would be central to their marketing strategy for the release and subsequent tour. However, as the band began their campaign they noticed engagement had fallen off a cliff. Each post was only reaching a small fraction of their audience. Befuddled, the band’s team went to Facebook to see what was wrong. The response they received would leave them sick.
Facebook had recently introduced paid advertisements. With the platform achieving rapid growth, brands had begun knocking on Facebook’s door to reach consumers where they were increasingly spending their time. Thus, Facebook’s algorithm was altered to maximize the impact of paid ad campaigns. Organic reach was drastically reduced and so to reach the band’s full audience they would need to spend the equivalent of a Super Bowl commercial on paid advertisements.
Jaws dropped to the floor. Nothing would ever be the same.
Facebook’s behavior foreshadowed what was to come with the maturation of social media platforms. This pattern of prioritizing growth and then extracting as much user value as possible is described by Chris Dixon in Why Web3 Matters:
Centralized platforms follow a predictable life cycle. At first, they do everything they can to recruit users and third-party complements like creators, developers, and businesses.
They do this to strengthen their network effect. As platforms move up the adoption S-curve, their power over users and third parties steadily grows.
When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. To continue growing requires extracting data from users and competing with (former) partners.
For Facebook, changing the rules of engagement (pun intended) was just good business. For the band? Facebook’s actions demonstrated who really controlled their audience. Being beholden to a misaligned corporation for reach left a taste in their mouth that would drive this musician into the world of web3. Editors note: Drop a comment with your best guess of who this musician and there band are!
In today’s One Big Idea we will dive into social media’s state of play and the opportunity to build a better future.
The power of social media apps today can be described by Metcalfe’s Law. Otherwise known as network effects, Metcalfe’s Law states the value of a network increases to the square of the number of users in the network.
In other words, every new user has an exponential increase on the value of the network. This increase in value then drives even further adoption and accelerates the growth flywheel. To continue with our Facebook example - more people joining Facebook, means the value of the Facebook network increases, which results in…even more people joining Facebook.
The social apps of today leverage network effects to reach scales of epic proportions. Facebook, the number 1 social app with 2.79 billion users, has over 300 million more users than the biggest country in the world (China, 2.4 billion).
This scale has positives for end users. For starters, the platforms are “free”. This is due to social media companies running strong advertising businesses enabled by having the most robust user databases in the world. Will dive into the dark underbelly of this point later but it’s worth acknowledging the most popular applications in the world do not cost a dime to end consumers.
Additionally, these social applications are largely responsible for the rise of the creator economy. With free global distribution, creators have access to would-be fans around the world. From YouTube streamers to Tik Tok comedians, anyone with an internet connection has a platform.
This scale has also enabled digital communities to thrive. Nothing is too niche to find a home when you have billions of people connected. Looking for “Genuinely Stoked Goats”? So are 176,768 other people on Facebook.
But these positives have come at a serious cost. Consumer choice, privacy, and fair compensation have all suffered as the result of misaligned incentives from centralized for profit corporations.
The same network effects responsible for social media’s massive growth has served to deter direct competition. As an upstart, you would need to convince someone your less valuable network is worth the high switching cost. Without creating a new value proposition (e.g. Tik Tok was differentiated from Instagram) its an almost insurmountable task. These networks are highly defensible moats which have stymied new social media apps from achieving success.
In addition, remember how I said we would get back to the whole “free” product benefit? Well as Andrew Lewis once said, “if you are not paying for it, you're not the customer; you're the product being sold”.
So what is being sold exactly? Your data. Social media companies sell your data to advertisers. This is used to influence not only your purchasing behavior but how you view the world. As was made famous by the Cambridge Analytica scandal, your data is the key to your psychology. Whoever controls your data then is able to influence you without your consent.
Social media companies have also used their free products to shield themselves from paying creators higher sums per user. In 2021, Facebook paid out $0.10 to content creators per user. On YouTube, the average channel payout was $405.
What’s worse is because these platforms operate as walled gardens creators have little recourse over their measly payments. These applications are not only where their audiences live but where they have spent time cultivating a following. An inability to take their audience with them means creators are left to play by the rules of these corporations, no matter how unfair they may seem.
Lastly, we sadly likely all have experience with the highly addictive nature of social media. An advertising model incentivizes applications to prioritize screen time. As a result these applications are designed to hijack our dopamine with never ending content and notifications. These dark patterns are having a real impact on our collective mental health. Feelings of social isolation, anxiety, depression, and even suicide are all on the rise. It is clear prioritizing clicks over mental health has had a detrimental impact on the psychological well being of many in society.
So then how do we solve these issues while maintaining the benefits of social media?
Most issues from today’s social media landscape can be attributed to misaligned incentives from centralized conglomerates. Value accrual is consolidated into the hands of a few platforms instead of the individuals who are responsible for their success.
A social platform built to solve today's problems would serve more as a public good than a for profit institution. Yet, you need strong financial incentives to convince would-be builders to invest their time creating these platforms. No one ever got rich creating a public library.
One proposed solution is to create interoperable protocols. Unlike platforms, protocols are application agnostic. They serve to connect ecosystems through a universal infrastructure. While mainly developed as a public good, these protocols can institute fee structures or develop token economies for transacting on the network. Ethereum itself is a protocol where value accrual is received by all participants as the ecosystem develops. Ethereum is both managed by the not for profit Ethereum Foundation and for profit developers. These groups work in tandem to oversee the chain’s development through the implementation of Ethereum Improvement Proposals (EIPs).
In his essay “hyperstructures”, Jacob defines such protocols by being:
Unstoppable: the protocol cannot be stopped by anyone. It runs for as long as the underlying blockchain exists.
Free: there is a 0% protocol wide fee and runs exactly at gas cost.
Valuable: accrues value which is accessible and exitable by the owners.
Expansive: there are built-in incentives for participants in the protocol.
Permissionless: universally accessible and censorship resistant. Builders and users cannot be deplatformed.
Positive sum: it creates a win-win environment for participants to utilize the same infrastrastructure.
Credibly neutral: the protocol is user-agnostic.
Lens Protocol is one such hyperstructure whose aim is to solve the social media problems of today by creating the web’s social graph.
A social graph is a representation of the interconnection of relationships in an online social network. For Lens Protocol, creating a social graph means building the foundation for all social apps. In this way all user data relationships are shared across the protocol. Imagine if your social profiles today were interoperable. Meaning you could sign up for a Twitter account and all your social data (people, actions) from Instagram, Facebook, and Tik Tok would already be there. That’s the idea behind creating a base layer.
To succeed, hyperstructures like Lens Protocol require vibrant application ecosystems. Today, apps like Lenster (Web3 Twitter), Alps Finance (social DeFi), and Zilly (Web3 Discord) are using the the protocol to jump start their development.
The beauty of such a hyperstructure is it’s not limited to a single application or use case. A social graph could be used to build the next Uber, Airbnb, Substack, or any other application which requires access to the social data of its users. You could see how a Lens Protocol could serve as the single sign on for one’s identity across the web.
However, web3 social has a long way to go till it’s ready for primetime. Some of the issues protocols like Lens will need to tackle include:
Cold start problem - No one likes an empty party. Protocols must convince developers to create applications, creators to develop content, and users to participate.
Wallet adoption - Web3 wallet adoption, while growing, remains in its infancy. There are 200M total Ethereum addresses and only 274K daily active Polygon addresses (where Lens Protocol is being developed).
Clunky User Experience - Because each action is represented on-chain a transaction must be signed. Actions like following and posting are throttled by the bandwidth of the platform.
Immature Incentive Structures - Social media platforms today are able to highly monetize their users because their positions are defensible. In a protocol future, applications are free to charge but users are free to exit. This will put pressure to keep fees very low. Great for the end user but a concern for developers considering making the investment.
Yet, history tells us the problems of today will be solved by the invention of tomorrow. As incumbents continue to increase their rate of value extraction, participants will increasingly feel the need to find sustainable alternatives.
Thanks for reading. Happy exploring and make it a great week.
-austin
Why Web3 Matters by Chris Dixon
Lens Protocol, Web3’s Social Platform by Blockworks (Podcast)
Hyperstructures by jacob
Lens Stats by Lens Protocol
The SocialFi chain.
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