The Business Case for Decentralized Social Media and Why It Matters Now
Partners
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VALA - Vala is a SocialFi platform that integrates decentralized social media (DeSoc) with decentralized finance. It empowers communities by allowing users to trade crypto, create content, and engage socially while earning rewards.
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OPTIMISM - Optimism enhances Ethereum scalability with Layer 2 solutions, boosting transaction speed and reducing costs. It supports decentralized social media (DeSoc) platforms by enabling scalable, secure interactions, ideal for high-throughput applications.
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LIT - Lit Protocol provides decentralized tools for secure data sharing and access control, enabling developers to build applications that prioritize user privacy and data sovereignty. By ensuring secure data management, it helps to foster trust within decentralized social media ecosystems, making it a valuable asset for platforms focused on privacy and user ownership.
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1. The Need for Decentralized Social Networks
2. Who’s Afraid of DeSoc?
How Traditional Networks Cope
3. Inside the DeSoc Ecosystem and Architecture
4. Dare to Disrupt: DeSoc Business Models and Use Cases
With the innards of decentralized social media in mind, let’s explore how one might build a decentralized social media business. You’ll have a glimpse into several business models as well as case studies for content monetizing, including what has and what hasn’t worked, so you can build something resilient.
5. The Decentralized Social Media Generation Starts Now
So what’s next, and how can you capitalize on the current landscape? It’s time to explore what’s really in it for you as a business or creator and how to get started. In this chapter we’ll dive even deeper into the implications of Web2 companies with integrated Web3 features and how you can leverage these and other opportunities. We’ll also reveal some of our predictions to help you understand why this is the time to get involved.- Centralized social media platforms are increasingly challenged by censorship, privacy violations, and unfair revenue models. These issues drive creators and businesses to explore decentralized social media as a viable alternative to regain control over their content, audience, and monetization.
- DeSoc platforms with models that resemble Web2 giants lead the adoption curve. Applications gain traction by offering familiar functionalities, such as X-like microblogging which make the transition smoother. Niche platforms aiming to replicate video-centric experiences are still in the early stages and struggle to gain adoption.
- Achieving network effects is the biggest challenge for DeSoc platforms. DeSoc platforms need strong initial adoption to build momentum. Without overcoming the hurdle of bootstrapping organic growth, widespread adoption of DeSoc remains difficult. Successfully sparking these network effects is essential for DeSoc platforms to thrive.
- DeSocs offer a more profitable social media economy for creators by offering drastically lower take rates. Platforms allow creators to earn directly from their audiences through tipping, NFTs, and subscriptions without platform fees massively diluting their earnings, whereby retaining more value and gaining borderless access to global audiences.
- In addition to low network effects and high switching costs, user experience is a hurdle for DeSoc platforms. The complexity of wallet setup and private key management creates friction for mainstream users and hinders adoption. Web3 feature integrations, like token-gated communities and Web3 wallets in platforms like Discord and Telegram, help familiarize users with decentralized concepts.
- Hybrid Web2-Web3 models can become competition to native DeSoc, leveraging their large existing user base. This could transition users toward decentralized ecosystems but also diminish DeSoc’s unique value proposition, forcing networks to innovate faster to stay competitive.
- The future of DeSoc is promising but depends on continued innovation and user education. As the Web3 space grows and more businesses recognize the value of decentralized social networks, the way we create, share, and monetize content changes. The question is, who wins the race, native DeSoc or hybrid platforms?
Led by
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Leon Waidmann
Head of Research
Conducted by
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Ananya Shrivastava
Research Analyst
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Ambreen Khral
Market Researcher
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Arin Soleymani
Head of Business Development
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Michał Moneta
Leader & Chief Strategy Officer
Contributors
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Ruth M. Trucks
Head of Content
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Lucas De Melo
UX Designer
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Chris Braithwaite
Content & Technical Writer
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Kade Garrett
Content Writer
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Veronica Kirin
Content Writer
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Adewale Aloba
Graphic Designer
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Boris Agatić
Data Scientist
Thought Leaders
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David Sneider
Co-Founder, Lit Protocol
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Rupert
Vala, Co-Founder
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Benjamin Jones
Optimism
How did we approach the research?
The research was based on the "grounded theory." It means we had no specific presumptions before starting the work. The "business" part of the analysis relied primarily on qualitative research methods.
Methodology
The Onchain Research Team utilized the grounded theory approach, meaning we began without preconceived notions about the findings. Our primary goal was to objectively analyze decentralized social networks, focusing on how these platforms reshape online user interactions, data ownership, and content monetization.
The study was conducted using the following criteria
- Case studies: Detailed case studies of leading DeSoc platforms, such as Lens Protocol, Farcaster, Fantasy.top, and Friend.tech, provided insights into their technical structure, business models, and user engagement.
- Survey data: We gathered feedback from 410 participants in the DeSoc ecosystem, focusing on user pain points with Web2 social networks and their motivations for adopting decentralized alternatives. The survey covered privacy concerns, censorship, and monetization frustrations.
- Comparative analysis: We compared DeSoc platforms with traditional Web2 networks to highlight the competitive advantages that decentralized systems offer, particularly in terms of ownership, privacy, and creator monetization.
Research limitations
While this report offers a thorough analysis of DeSoc, several limitations should be noted:
- Evolving technology: The rapid pace of innovation in Web3 and DeSoc means that the findings presented here could quickly become outdated as platforms evolve and adopt new technologies. This could impact the report’s long-term relevance, especially given the ongoing development in areas like zero-knowledge proofs (ZK proofs) and account abstraction.
- Data constraints: DeSoc platforms are still emerging, leading to limited and sometimes incomplete data or even misleading data. This restricts the generalizability of some conclusions.
- Case study bias: Though insightful, case studies are limited by sample size and potential biases, which affect the representativeness of the results.
- Survey bias: The DeSoc Survey had 409 participants, primarily aged 25-44, familiar with Web2 platforms like Twitter/X. Their preferences may only partially represent a broader or older audience.
- Limited awareness: 43% of respondents were unfamiliar with DeSoc platforms, indicating current data may reflect early adopters rather than mainstream users.
- Platform focus: The analysis centers on leading platforms like Farcaster and Warpcast, potentially overlooking insights from other emerging DeSoc projects.
- Revenue comparisons: Many Web3 platforms lack traditional “take rates” due to their decentralized operational models. The percentages shown for these platforms often represent their revenue generation methods or fees and may not be directly comparable to Web2 take rates.