Partner at Pantera Capital: Web3 social platform innovative model

Author: Paul Veradittakit, Pantera Capital Translation: Shan Oppa, Bitchain Vision

Pantera Capital is excited about the new ways web3 unlocks social platforms that enable users to connect and interact with creators, influencers and fellow users.Last month, the popularity of decentralized social protocol Farcaster soared with the launch of the Frames feature, which allows developers to create interactive, embeddable posts for their audiences.Soon, users can cast NFTs, complete questionnaires, play Doom, and even get rewards directly through Farcaster’s flagship client Warpcast.

Previously, this seamless in-app experience was impossible with the traditional web2 social media platform.Identity, ownership, tokens and payment channels – these are all features of blockchain that make it possible to create new social features like Frames.In this article, we will focus on different social protocols and platforms and explore how they can leverage web3’s building blocks to create a completely new experience.

Farcaster and Lens

In web2, the data is divided into islands and controlled by the platform itself.This means developers cannot create alternative platforms to present content in novel ways.X (formerly known as Twitter) limits users to their platform, without providing any flexibility in interfaces that use different algorithms.Additionally, users do not own their accounts – if they are banned, they lose the audience they reach and the ability to post.

Both Farcaster and Lens are two popular social protocols that take a unique approach: open data access and give users control over their accounts.Farcaster stores its post data on a decentralized storage network called Hubs so that it can be accessed by everyone.Additionally, the Farcaster profile links to the user’s Ethereum account on the Optimism platform, ensuring that users truly have their digital identity.

Lens is an on-chain social graph and developer tool that enables users to own their content.Interactions on Lens can be published on the chain or to Momoka (a data availability and verification layer).Creating a profile on Lens grants the user a unique, sequentially numbered NFT.This NFT is a protocol access point for users to perform operations such as following, posting posts, and comments.Since users own their NFTs, they have their profile.

Developers are using these open protocols to build a variety of engaging clients and features.Users publish content at the protocol level and can access the same content through one of many clients.Warpcast is Farcaster’s flagship social media client that offers a user experience similar to X, while Phaver and Orb provide popular experiences on Lens, as well as many other clients.For example, Supercast is a client for more serious and active Farcaster users; Sealcaster allows you to publish Farcaster posts anonymously with zero-knowledge proof; Tape is a client for media sharing on Lens.

Innovations triggered by these open protocols are not limited to client applications.Protocols such as Farcaster and Lens are different from web2 because they have on-chain identity, payments, tokenization, and composability that combine to enable novel innovation.For example, on Farcaster, new experiments like DEGEN are emerging – a tradable token that users can tip others by commenting on posts.In addition, tools and services are also expanding significantly.Bountycaster is compatible with any Farcaster client and allows users to create and complete tasks to earn USDC rewards.Lens’ open operational features allow embedding of custom chain operations in publishing, enabling new features in social push such as payment (fees, tips), NFT minting, token issuance, and more.Whether it is a tokenized game that is directly embedded in the app, a prediction market that scores by updating the social reputation on the user chain, or a tool that makes it easier to aggregate Farcaster and Lens data, there are countless experiments, applications, and basics.Facilities and tools are waiting to be created.

Friend.Tech

Last September, web3 social app Friend.Tech took the crypto community in storm.In just a few months, the platform has created more than 100,000 accounts.The app introduces a novel feature that allows users to purchase influencer’s “keys” and unlock exclusive privileges such as direct message access and access to closed chat rooms.Influential figures including game influencer FaZe Banks and NBA star Grayson Allen joined the platform to share their views on gaming, encryption and sports with key holders.

What makes applications so excited about key holders is the ability to trade keys, making them a form of investment for future influencers’ needs.Through friend.tech, users participate in buying and selling keys, and a portion of the revenue flows to influencers and the platform itself.Many top crypto influencers start earning hundreds of thousands of dollars through royalties and they share alpha information and ideas about the crypto market.In just 2 months, friend.tech incurred nearly $20 million in fees.

Platform activity has dropped significantly since its peak, with trading volumes falling by more than 99% compared to the peak, mainly due to retention issues.However, friend.tech shows some powerful features in web3 social platform promotion:

1. Progressive Web Applications (PWA): A key factor in friend.tech’s rapid growth to over 100,000 users is its progressive Web Applications.This technology allows users to use familiar login methods such as Google, Apple or SMS verification instead.This greatly simplifies the onboarding process for average users and makes it easier to access.

2. Leverage Web2 Audiences: friend.tech attracts users by leveraging Web2’s existing user base.By allowing users to connect through their X (formerly known as Twitter) accounts, friend.tech continues to spark discussions about its platform on the X platform, thus attracting more X users to sign up.

3. Tradable social assets: friend.tech introduces a dynamic social assets market where users can trade keys on their Layer 2 Base because the transaction fees are lower in this layer.As we saw in the 2021 BitClout success story, combining financialization and speculation with social applications has the potential to have viral effects.

Focus

DeSo is a PanteraCapital portfolio company that recently announced plans to launch its flagship app Focus in June this year, built on the DeSo blockchain.Focus allows users to pay for content in cryptocurrency, and supports functions such as encrypted native subscriptions, paid messages and paid forwarding.Focus also integrates novel speculative primitives, such as tokenizing creator income through a new product called “Creator Coin”.

Solving cold start issues (i.e. attracting enough users to make social networks valuable) is a major challenge in developing social platforms.Agreements such as Farcaster and Lens engage users by providing innovative experiences that engage users in unique interactive ways.Friend.tech, on the other hand, is strategically targeting the cryptocurrency field opinion leaders, using their followers to bring a crypto-savvy user base to its platform.

Focus is trying to address the cold start issue by using web3 incentives.Users with a large number of followers on networks like X, Instagram, TikTok, or Twitch will be motivated to sign up and participate in the platform as they will receive FOCUS token rewards proportional to their measurable influence.The team calls this novel mechanism “social airdrop.”

Improving user retention is another necessary factor in the success of social networks: users need to continue to stay on the platform to interact.The DeSo team solves this problem by creating a “release-to-earning” mechanism: Focus will issue token rewards to top creators and users who are actively involved in content interactions every week.Since user accounts are associated with their on-chain wallet address, Focus can distinguish between real users and volume bots by viewing user activity and wallet balance.

Even without incentives, why should creators continue to use Focus instead of other platforms?

Focus blockchain technology brings innovative ways to make money for creators:

• First of all, Focus supports users to use cryptocurrency to subscribe, paid messages and “paid forwarding”, among which the “paid forwarding” function is essentially equivalent to the decentralized advertising model on the platform.

• Second, since all content data is stored on the DeSo chain, users can create new content using Focus’s generative AI tools, such as mashing up previously published images by creators.Creators can set fees for each user query their work.

• Finally, through the “Tokenized Creator Income” function, emerging creators can issue and sell “creator coins”, which allows them to earn a certain percentage of their income from content income.This allows early supporters to invest in creators and share the benefits of their success.

Summarize

Today, with the advent of Layer 1 and Layer 2 technologies, social platforms can operate without a high cost burden and can handle data storage issues in novel ways.Because of this, we are witnessing the emergence of various social platforms in the web3 field.We have seen different ways social platforms use blockchain, and here are some important ones:

• Using open protocols to attract developers to create novel use cases is very effective.Farcaster and Lens are not the next Facebook, but rather they are the basic protocols that can support clients and applications that tens of millions of users will join in the future.As more and more data is generated and flows freely between platforms, these networks will grow together.

• We also see that speculative elements like the keys of friend.tech can create viral transmission effects.With the advent of solutions that support progressive web applications (PWAs) and Layer 2, and the implementation of low transaction fees, it will be easier to bring users into killer web3 social applications.Soon, it will become a reality for users to trade seamlessly just like in video games.

• Cryptocurrencies provide creators with new ways to make money.Whether it is Focus’ paid forwarding and paid private messages, or friend.tech’s key royalties, cryptocurrency eliminates any payment friction, allowing creators to surpass pure pursuits to get the most views.Therefore, they can choose the best way for them to earn money.

• Using cryptocurrency incentives to address the cold start problem of the network has great potential in the future.In the past, Blur finally surpassed OpenSea in trading volume by launching airdrop season activities.Traders with the highest trading volume will receive more BLUR token rewards.Through Focus’s practice of targeting web2 platforms with crypto incentives, we can foresee success in platforms that use this strategy to attract the most influencers on platforms like X, YouTube and Instagram.

In the coming years, social applications and networks that can not only connect users, but also utilize cryptocurrency-based building modules such as open data, tokenization, ownership and identity will attract more users into the crypto space.PanteraCapital looks forward to accelerating the future development of web3 social networking.