Outlier Ventures: The rise of decentralized social networks

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Original article by: Lorenzo Sicilia , Head of Engineering at Outlier Ventures

Original translation: xiaozou, Golden Finance

Outlier Ventures has noticed healthy growth in some decentralized social networks, and Farcaster and Lens Protocol have begun to gain real user attention. When it comes to mass-market products, crypto is becoming more and more practical and efficient. Until now, the lack of private key management and mobile-first experience has hindered peoples crypto adoption.

In this article, we’ll take a deep dive into several of the main crypto-decentralized social media contenders, their respective features, architecture, and the opportunities that Web3 founders are keen on building new permissionless social graph protocols.

1. Social Networks

After more than a decade of using Instagram, Facebook, Twitter and other platforms, everyone knows how social networks work. The concept of a social network is centered around the user, who provides the system with their preferences by filling out a profile and selecting the accounts they like to follow, and the user is given a customized stream of information generated in real time.

Social networks have built their empires around this simple concept, with the ultimate goal of capturing users’ attention and keeping them inside their walled gardens for as long as possible. The value of users’ data is embedded in their data, which in turn becomes a commodity.

Decentralized social networks want to break down these barriers, enable portability of user identities, give users more control over their preferences/privacy, and make switching between platforms easier.

Just as cryptocurrency brings permissionless transactions to anyone, anywhere in the world, DeSo (decentralized social) brings permissionless communication and uncensorable broadcasting capabilities.

However, what is really exciting is that DeSo is also permissionless for builders, allowing developers to make new developments based on existing protocols without having to obtain innovation permission from any gatekeeper. The successful paradigm of DeFi Lego can be repeated here.

Before the emergence of Web3-based DeSo, the only decentralized social attempt was Mastodon. After Elon Musk acquired Twitter, Mastodon seemed ready to take advantage of this, but ultimately its usability issues and fragmented user experience caused its growth to stop at 1 million daily active users.

Outlier Ventures: The rise of decentralized social networks

Today, Farcaster, Lens, and other projects are trying a different approach, building on Web3 primitives, and bringing something new to the table.

2. SocialFi

SocialFi adds Web3 primitives to decentralized finance on top of social graph networks. Participants include content creators, influencers, and end users who want better control over their data and freedom of expression, and the ability to profit from social media attention and stickiness.

The monetization method is based on cryptocurrency, while identity management is handled by a set of private keys. Most of them say they can make use of decentralized autonomous organizations (DAOs) to resist censorship. But nothing has been concluded yet.

Let’s look at the main differences between it and other social networks:

  • Token-gated areas: Only the creator’s token holders can access certain features or areas.

  • Tipping: People can receive tips in the form of cryptocurrency, which can be platform tokens or other tokens.

  • One-time or recurring subscription: Crypto payments for digital goods or services are made within the platform.

  • Platform Incentives: Users and creators can receive platform token incentives based on their participation.

While these concepts have been around for a while, they didn’t gain significant market traction until Friend Tech saw the potential of token-gated chats. Users need tokens called “keys” (which can be traded) that allow them to benefit from the growing popularity of content creators.

Friend Tech had 800,000 unique address users at its peak, but since then, retention has dropped significantly.

Outlier Ventures: The rise of decentralized social networks

While bonding curves are good at driving adoption by creating a sense of urgency and FOMO, they fall short in terms of user retention over the long term. To truly keep users sticky, two key elements are required: a network effect that amplifies the value of the platform as more users join, and clear long-term utility that provides tangible benefits beyond short-term gains.

3. Web3 Social Graph

A social graph is a representation of relationships between entities such as people, organizations, places, and anything else that can be connected to one another. Web2 entities like Facebook, Twitter, Instagram, and TikTok have accumulated significant network effects, especially in terms of discouraging users from joining other social sites, as switching networks means starting over from scratch.

Projects like Lens, Farcaster, and others are building differentiation from this friction point by starting to develop true open graphs with multiple front ends that leverage the same data to provide different user experiences.

Yet, Facebook generates 4 petabytes of data every day. Every minute, 510,000 comments are posted, 293,000 status updates are made, 4 million likes are received, and 136,000 photos are uploaded. No blockchain currently in existence can handle this amount of data, and it may never be able to, because blockchains are optimized for a different type of use case: permissionless value exchange.

For example, double spending is a typical blockchain financial risk that is insignificant in a decentralized social network that handles usernames, content distribution, and notifications. The Lens and Farcaster teams should consider different assumptions with various pros and cons.

4. Lens Protocol

Lens Protocol is a composable social graph created by Aave founder and CEO Stani Kulechov. The protocol is community-driven and currently deployed on Polygon.

Lens is built around a few key smart contracts that handle various aspects of social interaction.

  • Profiles are represented by NFTs, the main objects in the protocol. If you own one of these NFTs, you control the social graph and the content. -Profile contains the history of all Posts, Quotes, Mirrors, Comments, and all other content generated by the user.

  • Publications represent the content of the protocol and there are four types: Posts, Comments, Quotes, and Mirrors. Posts is the base object and the others are extensions of the base entity. Most importantly, each publication has a ContentURI. Basically, everything stays on-chain except for the content (like images, text, etc.) which is associated with a decentralized storage solution like IPFS or Arweave or even AWS S3.

  • Mirrors, Comments, and Quotes allow users to interact with a publication by commenting, quoting, or spreading its content. Therefore, all references to the original publication module follow the same rules (e.g., only followers can quote/comment/mirror).

  • Open Actions provide a way for developers to build custom functionality that can be embedded directly into the protocol. You can think of them as hooks that are triggered by the protocol whenever something happens (e.g. Alice can see that Bob gave her a tip, so she can have an indexer that tracks earnings).

Outlier Ventures: The rise of decentralized social networks

From the beginning, the Lens team focused on the protocol itself and let the community take charge of the front-end construction, so many different UIs were created, each with its own style.

Outlier Ventures: The rise of decentralized social networks

The result is a vibrant ecosystem, but also a bit of chaos, with many projects disappearing after a few days. However, we are gradually seeing a consolidation of projects, such as buttrfly, hey.xyz, and orb, which are gaining traction.

After running Lens v1 for a while, Lens launched Momoka, an Optimistic L3 that goes beyond the blockchain space. Instead of storing data directly on Polygon, they leveraged the Data Availability (DA) layer to reduce costs simply by uploading data to Arweave.

Outlier Ventures: The rise of decentralized social networks

5. Farcaster

Farcaster is another Web3 social network built on Ethereum that utilizes on-chain smart contracts and a peer-to-peer network matrix based on the “Hub” client.

Similar to Lens, Farcaster is open, and many different clients have been born based on it. The most popular one is Warpcast, which is developed by the Farcaster team itself. There are also Supercast (with paid features) and Yup (focused on cross-publishing).

In 2022, Varun Srinivasan published a blog post on Sufficient Decentralization that laid out some ideas that have been at the core of Farcasters architecture and approach ever since.

The main idea is that a social network is sufficiently decentralized if two users on it can find each other and communicate across other barriers on the network.

To do this, you need to:

  • Get a unique username

  • Post messages under this username

  • Read a message from any valid name

Outlier Ventures: The rise of decentralized social networks

Farcaster implements its architecture through a set of core smart contracts deployed on Optimism:

  • IdRegistry creates new accounts and allows users to transfer and recover Farcaster accounts. It also integrates with ENS to make usernames available to their rightful owners.

  • Storage Registry rents storage to accounts. Storage prices are denominated in USD and converted to ETH using an Oracle. Prices vary based on supply and demand.

  • Key Registry publishes app keys with accounts so they can publish messages on their behalf.

As you can see, none of the above smart contracts send or receive messages, this responsibility is delegated to Hubs. Hubs is a distributed network consisting of Hubble instances, which are nodes built using Typescript and Rust.

Each node is responsible for validating, storing, replicating messages, and evaluating its peers.

Message-level authentication is performed by verifying a valid signature from a user account key.

Once the message is verified to be valid, it is stored in the hub through an asynchronous process that utilizes the CRRDT (Conflict-Free Replicated Data Type) approach.

Replication is implemented using diff sync and a gossip protocol based on the popular lib p2p codebase. The Hub periodically selects a random node to perform a diff sync, comparing Merkle tries of message hashes to find missing messages.

Hubs have a strong eventually consistent architecture because even if they go offline, their state can be reconstructed using their peers.

Peer nodes are critical to maintaining the state of the protocol, so they evaluate each other. If a node does not receive valid information, falls behind, or gossips too much, it may be ignored.

Outlier Ventures: The rise of decentralized social networks

6. No permission required

From these protocols and principles, we see new primitives emerge. Among them, Farcasters Frame has received considerable attention.

Frame makes it possible to inject custom experiences into the Farcaster feed. It extends the Open Graph standard and turns a static image into an interactive experience by adding up to 4 buttons. When the user presses a button, they get a new image based on the button click and the user metadata sent to the Frame generation server.

Building on this, we’re starting to see a lot of experiments like creating pools, digital collectibles, and mini-games deployed through these Frames.

It is possible to create a Frame using any application server that can return HTML content, but we have seen a lot of Frames, such as https://framesjs.org/, https://frog.fm/ and others that help developers simplify the process.

Outlier Ventures: The rise of decentralized social networks

After the successful launch of Frames on Farcaster, Lens is now also under consideration, which shows that having common standards can be a powerful driving force.

7. Conclusion

Decentralized social networks still face huge challenges before they can fully succeed, including scaling their infrastructure to accommodate more users, simplifying the process of creating digital wallets for new users, and abstracting away gas fees as much as possible.

Despite these challenges, we have seen substantial progress in the overall user experience and a sticky community around Farcaster (e.g. ~50k daily active users, ~350k registered users). An important factor contributing to these numbers is the availability of a mobile app that is easy to install and provides a user experience similar to that of traditional social networks.

Another key factor is the permissionless nature of the protocols (e.g., Farcaster, Lens, etc.), which provides fertile ground for developers to innovate and build on top of existing blocks and features.

It’s like the summer of DeFi, and we are witnessing a dynamic environment of experiments (e.g. yup.io, a decentralized social network aggregator, drakula.app, a short video platform, or neynar.com, a SaaS tool based on Farcaster) emerging from these protocols.

Founders can now start building a native Web3 distribution channel for their projects through which people can start their journey, expanding from their initial point of interest to other apps embedded directly in their feeds (e.g., via Frames) or other linked apps. At the same time, the app that attracts new users can serve as a distribution channel back to the rest of the decentralized social network, thus starting a positive feedback loop.

This article is sourced from the internet: Outlier Ventures: The rise of decentralized social networks

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