DeFi has been one of those paradigm shifts that have practically impacted the life of its users. Since 2018, more and more employees and companies in Web 3 have started to process payroll in crypto, to a degree where some folks now have the majority of their wealth in crypto — in other words, there are people who literally “live on crypto.”

Social networking has the potential of not only empowering people’s financial lives with crypto but also the many aspects of social experience.

Starting in 2022, Lens Protocol and its ecosystem of social apps have started experimenting with various ways to build consumer-facing applications based on an on-chain social graph. There are also other protocols such as Farcaster that create new ways of P2P connections and applications such as Friends.tech that experiment with new ways of value extraction around social networks.

Be it the social-graph-based experiences powered by Lens profile NFTs, or value-based social networking experiences on Friends.tech, Web 3 social networking experiences have emerged to offer key advantages that Web 2 social does not offer.

We believe over time these will be the wedge features that will gradually migrate Web 2 social users over time. In this article, we will categorize these features and present our conclusions on where we believe Web 3 social will outstrip its Web 2 counterpart.

UIUX: new design patterns for new business models

Web 2 social network apps have long maximized business potentials out of their design patterns. Twitter built its ad business directly into its feed which now remains the majority revenue source. WeChat built social transactions into its DM interfaces, added banking features based on the social transaction feature, and expanded into an “everything” app, ultimately capitalizing on the original point of transaction in the DM interface.

In terms of the closest it comes to a category-definer, Metamask on its own has driven adoption by offering frontend DEX trading services to wallet users and become a transaction-fee-based business. Just by offering a frontend service alone, Metamask has generated $324 million since 2020.

How does this inspire us in Web 3 social? Web 3 users are by nature value users and Web 3 networks are inherently value networks. Going back to the formation of large Web 3 communities starting in 2020, most of the groups started off as value-discovering groups and DAOs operating on various DeFi protocols. Later we had branch-offs in NFT and gaming but the value habits of the groups remained.

UIUX built around the habits of these communities can lead to innovative business models around use cases such as trading opportunities, ticketing, events, NFT drops, whitelist campaigns, IDOs, prediction markets, community membership, etc.

While the Metamask frontend has served an effective example of application-level business modelling, there are many more use cases that have not been tapped as mentioned above. Web 3 social applications can innovate on the UIUX to embed these use cases in one superapp or multiple niche apps and build effective businesses and technologies by offering these services.

Data: on-chain data primitives for user-centric features

Blockchain as public data ledgers has long been the fuel for data analytics companies like Chainanalysis and Dune Analytics. These two data firms alone have a combined valuation of $10 billion. While these two businesses focus on to-business use cases, we can similarly create enormous value adopting the same methods for to-consumer use cases.

When DeFi protocols dominated on-chain activities, data as a primitive would mostly construe a financial activity ledger. However, DAO governance, on-chain credentialed events, NFTs and games are enriching the activity categories available on-chain, to the effect that there would most likely be more data categories available on a blockchain that would not be particularly available in the traditional social graph of a Web 2 social network company.

Leveraging on the blockchain data ledger itself, we can build interesting niche-focused applications with niche data or general purpose applications based on what we can call a “behavioral graph.” The difference between a behavioral graph and a typical social graph is that the behavioral graph includes not just relational data that indicate social connections between users, but also transactional data between users and protocols and activity data between protocols and applications.

A “behavioral graph” would just need to index and analyse enough of on-chain data to offer recommendations not just on social relations, but also product interests, productivity tools, essentially diversifying the use cases a graph database can cover.

More pertinently in a social network settings, a behavioral graph would be ideally used to build social “everything” app, one that, just as Elon Musk suggests, offers many everyday utilities that users would interact with on a daily basis.

Once the value of these features gets accrued in a on-chain revenue pool, then it can be easily shared with the users and organizations from which the data was generated in the first place, rewarding users for contributing their data. With ZK-proof, users can even choose to gate access to their data, valuing privacy over profit.

This kind of value capture and return of value to the user can readily generate a flywheel effect that incentivizes more users to onboard Web 3 native social networks, effectively allowing users to make money just by being more active on the network.

Infrastructure: social primitives with value effect

The behavioral graph is just one example of the many infrastructural primitives that can be built for social networks. Be it advertising, affiliate marketing, referral systems, all these protocols can enable new ways for users to receive value from the social experience.

Some other useful on-chain primitives based on the unique characteristics of the blockchain ledger includes on-chain credit scoring and proof of contribution. Different frontends can come up with different weights they put on particular types of data and generate different credit scores for different applications and use cases. A DeFi protocol may value DEX swap frequency and volume data more while a social network app may value NFT-related data more. Then based on the weight-variant of a specific scoring system, they can choose different ways to drop rewards based on the on-chain generated score and offer also perks accordingly.

These on-chain systems would easily be more trustworthy to the consumers of these apps compared to the Web 2 based systems as on-chain data transparency is guaranteed. In the case of need for privacy, ZK-proof can be used to verify the integrity of private data sets. Regardless, the features of Web 3 based systems in transparency and value return to the user to be massive advantages.

About TowneSquare

TowneSquare is a Web 3 native social network “everything” app that Bixin Ventures invested in. The TowneSquare team is building an ecosystem of application and infrastructural primitives to enable the value network experience described above.

TowneSquare offers a unique contextual UI that supports a super high degree of customization of interfacing based on the content’s contextual clues. The context can be an event, an NFT community, trading analysis of a token, a whitelist campaign, a new airdrop, etc., and the contextual UI would embed call-to-action interfacing directly with the content. This would allow the app to have a rich set of features and revenue sources in one single frontend.

TowneSquare is also building its ecosystem of primitives including NFT composability, on-chain referral protocol, advertising protocol, etc. to power incentivized network effect experiences for consumers to come to Web 3. These primitives, combined with the superapp TowneSquare is building, will power the next-gen social network experiences in Web 3 that are not possible based on Web 2 infrastructure.