SocialFi — Cobo Ventures Research Report and Commentary

Contents

Introduction:

1. Why Should We Pay Attention to the Social Sector

1.1 Market Size

1.2 The Current Pain Points of Web 2.0

2 Summary of Web 2.0 Social Products

2.1 The Evolution of Web 2.0 Social Products

2.2 The Features of Web 2.0 Social Products

3 What is Social and SocialFi in the Era of Web 3.0?

4 Two Core Differences Between Web 3.0 SocialFi and Web 2.0 Social

4.1 The Social Needs

4.2 The Finance Needs

5 What Are the Underlying Infrastructure for Building Web 3.0 SocialFi?

5.1 Decentralized Computing

5.2 Decentralized Storage

5.3 Decentralized Privacy Protection

Main Body:

6. Web 3.0 Ecosystem on Top of the Underlying Infrastructure

6.1 Bridge Layer

• Chainfeeds
• Mask Network

6.2 Blockchain Layer

• DeSo

6.3 Protocol Layer

• BBS Network
• CyberConnect
• Lens Protocol
• RSS3

6.4 Application Layer — Direct Communication

• Rally
• Nansen connect

6.5 Application Layer — Community

• Mirror.xyz
• Monaco Planet

6.6 SocialFi Application Layer — Social Club

• Friends With Benefit
• Whale

Summary:

7 The Current Development Limitations of SocialFi

7.1 Bottom End

7.2 Social End

7.3 Defi End

8 Features of Successful SocialFi Products

9 Prospect: The Future of SocialFi

9.1 DID

9.2 SBT

9.3 Future Applications of DID and SBT in SocialFi

9.4 Other Areas to Pay Attention to in SocialFi

10 Conclusion

11 References

Preface

1 Why Should We Pay Attention to the Social Sector

Social platforms hold a large amount of user traffic, portrait, and behavior data, containing a huge commercial value.

1.1 Market Size: According to the digital report of we are social, as of April 2022, there are 5.32 billion mobile users, 5 billion internet users, and 4.65 billion active social media users worldwide. Active social media users accounted for 58.7% of the global population, with an annual growth rate of 7.5%, higher than the 4.1% growth rate of internet users and the 1.7% growth rate of mobile users. New research from GWI shows that global internet users spend an average of 6 hours and 53 minutes a day online. Socialization will continue to be in demand throughout the era of Web 2.0 and Web 3.0.

1.2 The Current Pain Points of Web 2.0: In the era of Web 2.0, Big Tech Holds all the data of people on social platforms and traps users in the information cocoon through algorithmic push. Advertising-based business models have flooded web 2.0 platforms with eye-catching ads, and clickbait headlines — inhibiting in-depth content creation. For creators and users, these giants do not evenly distribute the benefits they get from using users’ information and creators’ production materials.

2 Summary of Web 2.0 Social Products

2.1 The Evolution of Web 2.0 Social Products

1. Early stage (1980–1998): In the desktop computer era, online forums such as BBS, web portal Yahoo! and search engine Google appeared to provide services for users to interact with each other and to help users obtain information; users used anonymous web names in the discussion areas, chat rooms or specific forums to interact with each other.
2. Growth stage (1999–2009): In the PC era, personalized websites such as blogs and personal homepages became popular. The users could share personal information, life moments, and make contact in a “friend-to-friend” way to get to know each other, then expanding further their social circle. Social networking sites became mainstream as offline identities and relationships were brought online; Facebook, founded in 2004, remains the most popular social network in the world and has dominated social networks since then.
3. Maturity stage (2010–2015): In the era of 3G smartphones, social networks skyrocketed in demand. In turn,a large number of social applications have also emerged; the features of social products and each subdivision track continuously improved, bridging the connection between social products and real life closer than ever.
4. Stable development stage (2016–2019): In the 4G era, the entertainment industry and businesses have capitalized on social media. People can be both content consumers and generators, but almost everyone is on social media. The domain of social products tends to be solidified while their leading products occupy the main market. While the acceleration of the internet speeds provide emerging fields such as live broadcasts, mobile games, and short videos wider access.
5. Future exploration stage (2020-present): In the 5G era, the next generation of social media is still in development. 5G speeds, larger capacities, and even lower latency are being combined with technologies such as the Internet of Things, blockchain, and AI. We will soon realize the interconnection of all things, and put human beings in an intelligent and interactive network, which will completely change our ways to socialize and interact. With lightning fast internet speeds, content shared on social media will also increase exponentially. The immersive and interactive information created with VR and AR is expected to replace text and pictures and become the next medium of information consumption of social platforms.

Conclusion: It can be seen that the most important reason for driving the evolution of social products is to upgrade the network hardware facilities and the development of mobile communication technology. From PCs to smartphones and 3G to 5G, social features have rapidly evolved from instant messaging to personalized content creation, and business monetization. Social networking has gradually undertaken more business functions.

2.2 The Features of Web 2.0 Social Products

1. The evolution of social ways: texting → photo sharing → voice communication → video social (such as short video and live broadcast)
2. The evolution of social scope: one-to-one (IM)→ one-to-many（such as online forums and blogs）→ many-to-many（such as communities and groups）
3. The status of top social products is solid: At present, top products occupy the vast majority of the market, and emerging products are difficult to gain market share
4. Texting is still mainstream while video sharing is expected to become a new trend: 5G networks will make video screen transmission more stable and clear, thereby improving the user experience of mobile social networking and bringing gameplay upgrades.
5. The social application scenarios are more abundant and novel, and it is expected to reshape the user’s social behavior chain: from unfamiliar or entertainment socialization to commercial socialization.The commercial monetization attribute of social networking is continuously prominent.
6. The fields of social products are constantly subdivided, including instant messaging, video sharing, image sharing, personal profile, Q&A, audio social, dating apps, live streaming, music sharing, microblogs, etc.
7. Social products pay more attention to community building: as young users continuously join, social products try to start with building a community with different interest circles to increase customer loyalty through UCG cultural building and then develop themselves into a many-to-many social clubs.

3 What is Social and SocialFi in the age of Web 3.0?

Data is one of the most important means of production in the current and near future of society and could be leveraged to promote productivity. The biggest difference between Web 3.0 and Web 2.0 is ownership and flow of ownership.Web 3.0 returns the means of production to the producer, which in turn changes the social relations of production.

In the social platform of the Web 3.0 era, people will have absolute control over their social data, which is a decentralized way of socializing. SocialFi product is a new product category based on the underlying infrastructure of Web 3.0, starting from people’s needs for ‘decentralized social’ or ‘decentralized finance’ (DEFI), which then merges these two needs. The combination of decentralized social networking and finance can break platform monopoly, eliminate single-point risks, and create new business models and product categories in the wave of the globally digital economy system.

4 Two Core Differences Between Web 3.0 SocialFi and Web 2.0 Social

While meeting all the functions of traditional Web 2.0 Social, Web 3.0 SocialFi also satisfies the following needs:

4.1 The Social Needs

The core ownership of digital assets from the platform to the individual. In the field of Web 2.0 social, users create content, operators formulate rules, and data is stored in a centralized server owned by operators, which cannot guarantee user data privacy.

By utilizing Web3.0 technologies of decentralized computing, decentralized storage, and decentralized privacy protection enable:

• An open platform where user data does not need to be migrated (lone island → open)
• On-chain storage, users can obtain richer information (closed → shared)
• Encryption algorithm to improve privacy security (leakage/loss/tampering → security)

As a result, the attributes of user’s identity become richer, personal influence become more valuable which is equally effective in different social platforms; traditional Web 2.0 social will highlight the influence of the platform, while Web 3.0 socialfi will highlight the social influence of individuals which would promote the development of personal interests and liberate the enthusiasm of each participant for production; in addition, Daos can automatically verify the user’s identity, having more application scenarios in the Defi field, such as decentralized credit.

4.2 The Finance Needs

The core is that through the decentralized financial products, everyone can quickly and easily monetize personal social capital and realize the high-speed circulation of personal social influence value; in the field of Web 2.0 social networking, the platform uses recommendation algorithms and customized advertisements to monopolize most of the revenue, and content producers get only a small part of the revenue from it, or even no revenue.

Finance is manifested in that users’ social activities (such as creation, comments, and likes) can:

• Basics: obtain assets (ERC20, 721, 1155, etc.) in the Web 3.0 world as “Proof of Work”
• Intermediate: gain privileges in the Web 3.0 world, such as governance voting rights and whitelist qualifications
• Advanced: help users grow as KOLs in the world of Web 3.0 and possibly become KOLs in the real world, then build a fan economy through personal brand (clothing, music, merchandise sales, etc.), and earn reputation income (publishing books, speeches, guests, etc.)

5. What Are the Underlying Infrastructure for Building Web 3.0 SocialFi?

5.1 Decentralized Computing: The traditional centralized data processing framework is vulnerable to single points of failure, security risks, and privacy intrusion; Blockchain is considered to be a new decentralized computing framework. There is no central entity, all nodes are equivalent participants, and the consistency of transactions is jointly maintained through a consensus mechanism. The blockchain essentially allows unlimited computing nodes to join the system, so it can gather massive computing resources. Among the underlying blockchains of Web 3.0 SocialFi, there are L1 public blockchains such as DeSo as well as parachain Subsocial (the first layer chain in the Kusama ecosystem), which are both specially designed for social networks. Compared to general-purpose blockchains, they can handle the storage and indexing requirements of social applications at scale.

5.2 Decentralized Storage: In view of the on-chain high storage cost, the storage solution of Web 3.0 SocialFi usually distributes storage outside the blockchain. Distributed storage technology stores user data on distributed servers to ensure that data is not controlled by a centralized organization and effectively prevents user data from being tampered with. At the same time, it can protect data originality, avoid large-scale data loss, and greatly reduce the cost of hosting centralized platforms. Based on economic models, nodes can also generate other revenues.

Common solutions are IPFS, Swarm, and Arweave:

• IPFS is a distributed peer-to-peer hypermedia protocol whose incentive layer is Filecoin, through which nodes around the world can store and retrieve this data.
• Swarm is also a similar decentralized storage network. The difference from Filecoin is that Swarm’s incentive system is built-in and executed through smart contracts on the Ethereum blockchain for storing and retrieving data.
• Arweave takes a different path: it promises permanent storage. That is “one-time payment, permanent access.”

5.3 Decentralized Privacy Protection: We can use zero-knowledge proofs, such as the “no information disclosure” feature of the zk-SNARK protocol, to prove that the transactions on the chain are valid without revealing the details of the transaction (receiver, sender, transaction balance). Secure privacy transfers between two anonymous users can be achieved with the confidentiality of social identities and transaction amounts.

Examples:

• NYM protocol Hybrid network: the data format in NYM is called Sphinx, which is an anonymous encrypted data packet format, so that the transmission source of the encrypted data cannot be seen and all the data looks the same in terms of feature structure and size. Mixing up the entry sequence of data in the network makes it impossible for the outside world to know the order in which the data is originally input and output so that the data cannot be accurately located and cannot be attacked by hackers.
• DID (Decentralized Identifier) can empower its users by allowing them to control their data, protect their privacy, and ultimately ensure their freedom through an open, censorship-resistant network. Users own their personal data and can carry it to all kinds of different decentralized applications.

6 Web 3.0 Ecosystem on Top of the Underlying Infrastructure

Note: As a fair third-party research institution, the ranking of project cases in each category below is in alphabetical order.

6.1 Bridge Layer

In the Bridge Layer, we can see there are many products with mixed forms of Web 2.0 and Web 3.0, which can not only satisfy users’ habits of using products in Web 2.0, but can also serve as a bridge for users to enter the world of Web 3.0.

Chainfeeds

Source：https://www.chainfeeds.xyz/

• Overview: RSS Aggregator, an open-source cross-platform RSS reader, is currently off-chain.
• Core Value: This tool can quickly organize and aggregate information from a professional perspective, help users quickly discover Web 3.0 trends, and solve the problem of RSS Feed initialization.
• Product Features:
• The web page has been launched; the content is subdivided into modules such as discovery, topic, in-depth, and flash news, to solve various information needs for different users.
• Mobile users can download a file with the suffix “.opml” and import the file into the RSS reader NetNewsWire, which contains more than 500 feeds; NetNewsWire is currently only available for iOS operating systems.
• User Portrait: Web 3.0 in-depth researchers, practitioners, communities, KOLs, etc.
• Team Background: Created by the team of Pan Zhixiong, the former research director of ChainNews.
• Token Economics: None

💡 Highlights: The team has strong information collection and aggregation capabilities, and has a certain influence on the Chinese community; the content module is very practical.

💡 Limitations:

1. The product is currently running on a centralized server.
2. There is no search function on the webpage, users can only get passive feed information; if users do not have Apple products, they cannot use the mobile terminal.
3. The product does not support personalized settings such as favorites.

Mask Network

Source：mask.io

• Overview: Mask Network is a portal that helps users seamlessly transition from Web 2.0 to Web 3.0. Its main functions are to encrypt and decrypt information during transmission, privacy socialization, borderless payment networks, decentralized file storage and sharing, decentralized finance and governance (DAO).
• Core Value: We hope to provide decentralized tools for the current centralized Internet, and build a bridge between the real world and the encrypted world, so as to realize the liberalization and privacy of personal data so that each user can control their own data.
• Product Features: Mask network allows Twitter and Facebook users to encrypt their messages on both social media platforms, along with features such as cryptocurrency red envelope sending and receiving, ITO, decentralized file uploading and storage.
• Twitter Red Packet: The Red Packet function launched by Mask Network and MakerDAO allows users to send and receive cryptocurrency red packets on Twitter without involving complex mnemonic phrases. The achievements are remarkable, it has become Maker’s largest traffic source other than DeFi, and attracted the attention and participation of Ethereum founder Vitalik.
• Gitcoin donation: The donation function jointly launched by Mask Network and Gitcoin allows users to directly donate to projects on Gitcoin without leaving the Twitter platform.
• File upload and download: A decentralized storage function jointly launched by Mask Network and decentralized storage project Arweave, allowing users to upload and store decentralized files directly on Twitter or Facebook.
• Team Background: Founder is Suji Yan
• Token Economics: governance token $MASK, token holders have the governance voting rights of MaskDao; team 23%, investors 28.45%, foundation 39.55%, public sale 7%, liquidity pool and airdrop 1% each.

💡 Highlights:

1. Based on the powerful user volume of Web 2.0, the Web 3.0 social ecosystem on top of this will have a considerable user base;
2. As the middleware for migrating from Web 2.0 to Web 3.0, it lowers the threshold for users to enter Web 3.0, and can lead users to experience Web 3.0 functions. Also it can accumulate traffic and build brand awareness before the threshold of Web 3.0 infrastructure is lowered;
3. Similar to WeChat mini program, it can integrate diverse Web 3.0 applications

💡 Limitations: Too dependent on large-scale Web 2.0 social platforms, and the value capture of governance tokens is limited.

6.2 Blockchain Layer

DeSo

Source：https://www.deso.org/

• Overview: DeSo is an L1 blockchain dedicated to social protocols. 150+ projects are currently deployed on it, including social products, creator tools, data analysis tools, and more.
• Core Value: DeSo, with a large number of custom storage and indexing logic customizations, is a public blockchain designed to handle a wider range of social activities and support social functions at scale than just sending/receiving funds. Any content provider can run a node on the chain, and all user information and social behavior data are stored on the chain. Third-party developers can customize the user interface and content distribution based on these data.
• Advantages compared to other public chains:
• Support native on-chain features
• More than 100,000 nodes have joined, and the average cost of a post is currently $0.000017
• Store as much information as possible on the blockchain, including profiles, posts, comments, end-to-end encrypted private messages, etc.
• Product Features:
• Social token: On the DeSo blockchain, every user can have a “creator token”, which is automatically generated when a user profile is created. The token price rises with buying volume and falls with selling volume. By purchasing other people’s “creator tokens”, users can obtain relevant rights from the creator, such as high-quality information, member content, event participation, potential investment, etc.
• Social NFT: Users can display their purchased NFTs on their personal homepages, and people can interact with their NFTs in the form of comments, likes, and diamonds.
• Social tipping: “Diamonds” as a form of tipping feature that allows users to tip a post

Source: Deso Docs

• Team Background: Founded by the founder of Basis(the algorithmic stablecoin protocol)
• Token Economics: The $DESO Single Token Model
• Allocation: The total supply is 10.8 million pieces, 2 million pieces for the development team, about 8.5 million pieces are used for curve release, and the rest are used as mining incentives; in addition to the function of the native token of the DeSo blockchain, $DESO can mainly be used to purchase “creator token”
• Supply curve: The token supply of each creator will be fixed at a certain amount range. As the number of tokens in circulation increases, the token price will increase (and vice versa), so that the creator’s influence can be intuitively reflected by the currency price.

Source: DeSo Docs

• Creators can set the creator reward ratio. Suppose it is set to 10%. For every creator token purchased by fans, the creator will get 0.1 and the buyer will get 0.9. DeSo encourages creators to promote their own token in this way.
• Creators can also choose to make their creations as NFTs for sale, and part of the income will be allocated to the fund pool of the corresponding creator tokens. Fans can display their purchased NFTs on their personal homepages to get social show-offs.
• Creator tokens and NFTs can be endowed with more functions, such as rights of membership-exclusive content and participation in special events, etc.

💡 Highlights:

1. The biggest advantage of DeSo is that it is a Layer 1 public blockchain specially customized for SocialFi, and its nodes can run on bare metal without requiring a virtual machine.
2. Based on the openness of the data on the DeSo chain, developers can use shared user data to build more applications, which is in return conducive to the overall ecological construction.

💡 Limitations:

1. Although the performance has been greatly improved, DeSo is still unable to catch up with the speed of traditional social platforms.
2. In the future, the hybrid proof-of-work mechanism will be transformed into a 100% POS proof-of-stake mechanism, and the anti-evil mechanism of nodes is unclear.

6.3 Protocol Layer

BBS Network

Source: https://www.bbsnetwork.io/

• Overview: The Web 3.0 version of BBS forum is built on EOS, where users can freely decide forum topics, create posts, initiate or participate in discussions, communicate with each other, express opinions, and create content, etc; all data is stored on the blockchain, and each post will be made into NFT which can be auctioned.
• Core Value: To build a BBS network which has freedom of expression, is censorship resistant, user-owned, and has an automatic revenue sharing system, and returns the ownership of content to the creators through NFT.
• Ecosystem Roles: including developers, operators, BBS forum owners, and users; developers build front-end interfaces that conform to user experience based on the underlying data; operators provide data storage services; forum owners can create forums, and users can create content and interact with each other.

Source: Whitepaper

• Team Background: The founder Eyal Hertzog is the former product architect of the DeFi protocol Bancor Protocol, and Guy Ben-Artzi is also the co-founder of Bancor.
• Token Economics: Dual Token Model including governance token $BBS and community stablecoin $CT
• $BBS can be used for governance activities such as community proposal voting
• 50% of the tokens are allocated for engagement mining (essentially paid to participants in BBS as social media advertising revenue), 20% for liquidity incentives, 10% for early investors, 10% for team retention, and 10% for long-term development fund.
• Advertisers can purchase $BBS as a reward to be distributed to ecological actors who provide services for the forum.
• $BBS holders can stake $BBS in long-term to gain higher voting power.
• $CT is a USD-peg stablecoin
• Each forum has its own CT token, and CT can be used as a means of forum governance (administrators have the right to temporarily freeze members’ CT)
• People buy $CT through $BBS, the $BBS paid for buying $CT flows into the forum treasury, and people need to pay $CT for buying NFT posts.
• $CT can cash out (received in $BBS) only by selling NFT, , $1CT holders can receive $1 BBS when they want to cash out.

Source: Whitepaper

• The NFT in BBS Network automatically flows into the market. The first sale price is $0.30, and each subsequent sale price will increase by 30%; 1/3 of the extra 30% premium goes to the NFT creator, 1/3 goes to the previous owner as secondary trading proceeds and 1/3 goes to the forum management. Due to the transparency of the data, rational investors can evaluate the advertising value of NFTs and then make purchases at suitable price, which can avoid hype and uneven distribution of income.

💡 Highlights:

1. By introducing external positive value, namely advertisers, in the form of trading NFTs, it can increase income for the community, and distribute the income to creators in proportion to realize content monetization.
2. Incentivize the entire ecosystem of BSS through Engagement Mining to try to solve the problem of low website traffic with collective power.

💡 Limitation: At present, advertisers can directly buy the advertising space at the top of the forum page, which will affect the user experience;

CyberConnect

Source: https://cyberconnect.me/

• Overview: CyberConnect is a decentralized social graph protocol designed to allow developers to easily build DApps on mainstream public blockchains and free users from centralized databases owned by network operators.Users can achieve one-click migration of their portable user data across multiple Dapps.
• Core Value
• Composability: Provides a standardized API interface, any developer can integrate CyberConnect’s social graph data
• User sovereignty: All social graph data is publicly available, while users have ownership and management rights
• Multi-chain support: not limited to a specific public chain, currently supports Ethereum and Solana
• Token Incentive: Adopt a decentralized DAO governance model and reward participants with tokens
• Product Features
• Protocol side functions:

Source: https://docs.cyberconnect.me/

• Composable infrastructure: DApps can tap into CyberConnect with two lines of code and focus on building their own social layer without reinventing the wheel.
• Consistent data standard: User’s social connection data are standardized for portability and composability.The protocol consists of a series of data standardization as data interoperability is a core property for user-centric Web 3.0 applications.
• Blockchain-agnostic: The CyberConnect Protocol is created for developers to build scalable applications in a multi-blockchain ecosystem. This reinforces the portability and extensibility of a Web 3.0 social experience.
• Cyberconnect front-end application (Protocol bears the same name)

Source: https://app.cyberconnect.me/address/cyberlab.eth

• Personal homepage can display:
• User-set NFT Avatar
• User connected wallet address, linked Web 2.0 App, and linked Web 3.0 Dapp
• User’s Followers, Following, POAP, and Galaxy Credentials
• Comments and Mirror Blog features currently are not available
• Team Background: Founder Wilson Wei from UC Berkeley School of Business
• Token Economics: $CYBER is not currently available for public sale, the total supply is 100,000,000, and $CYBER tokens will be used for early governance purposes only.

💡 Highlights: Users have the ownership of their data, and when switching Dapps, data of friends, watch lists, etc. will not be lost

💡 Limitations: It is resource-heavy to collect and clean a large amount of on-chain data. It is necessary to consider the issue of data collectionafter introducing the privacy protocol.

Lens Protocol

Source: https://lens.dev/

• Overview: Lens protocol is a decentralized, open and composable Web 3.0 Social protocol built by the Aave team and deployed on Polygon, with data stored in IPFS or Arweave. It allows anyone to create non-custody social profiles and build new social Dapps.
• Core Value:
• Own your content: The creator’s homepage will be minted as a Profile NFT connected with the creator’s wallet address; users have full control over their activity track data.
• Own your social graph: In the Lens ecosystem, each user can have a clearer social graph through a variety of Dapps, generating more possible links.
• Own your data: content data is stored in decentralized storage IPFS or Arweave.
• Ecosystem role: content creators, application developers and ordinary users; lens provides specific tools for these three categories of users.
• For content creators: Profile NFT

An address can have multiple Profile NFTs; Connecting a wallet to the protocol creates a homepage that can be minted as a Profile NFT which enables the wallet holder of the NFT explicit rights to create content, publish content, comment content and forward content. l

These footprints will be recorded to Profile NFT, while users without Profile NFT can only follow or collect content published by other creators.

• For ordinary users: Follow NFT, Collect NFT

When a user follows a creator, the user will get the Follow NFT while the creator sets the Follow NFT acquisition threshold, by paying or completing certain tasks before getting it, similar to membership mechanism of existingsocial platforms such as (example). Follow NFT records the order and number of users for creators to analyze their own traffic. The self-incrementing tokenID of Follow NFT can also be used in applications such as DAO voting and Pass cards. For example, only the top 100 followers can be granted voting qualifications or tickets to enter the fan community.

When a user collects a creator’s content, they also get a Collect NFT. Holders of such NFTs are often fans who are willing to pay for the content. The more NFTs they have, the greater the support for creators.

• For developers

Lens Protocol provides modular components such as Profile NFT, Follow NFT, Collect NFT and Mirror NFT, providing developers with a complete chain of social function development. Developers can use these basic components at will to build social products. The Dapps developed based on Lens can interact with each other and the NFT assets within can also be exchanged.

• Token Economics: NFTs as the tool of value carrying and value circulation within the ecosystem, no ERC-20 tokens issued yet

💡 Highlights:

1. As an open-source protocol, it provides highly composable modular components, which can help developers easily build diverse social applications on Lens; Lens encourages developers to develop more new components, which can continuously improve product experience and introduce more innovative functions.
2. External Dapps can also access Lens to jointly build the Lens ecosystem.

💡 Limitations:

1. Users need to go to the NFT marketplace to purchase Lens Profile in order to experience the full product functions, so there are certain usage thresholds.
2. In the absence of governance token, the ecological governance mechanism needs to consider how to ensure decentralization.

RSS3

Note: Revery is a project developed by the RSS3 team and it aggregates and displays users’ on-chain activities (such as NFT Mints) and activities of Web 2.0 social media accounts.

• Overview: RSS3 can be divided into RSS and 3; RSS is a content aggregation protocol in the Web 1.0 era, and 3 stands for Web 3.0. RSS3 runs on Crossbell, an EVM-compatible chain built by the team and has specific smart contracts embedded in it.
• Background: RSS is the abbreviation of Really Simple Syndication, which has formulated a format and standard for network syndication, and is a network transmission protocol. In order to track website information and scrape content, early developers developed the RSS protocol, so that information can be stored in RSS files in a structured way, and content distribution can be achieved at the same time. After importing a link into an RSS reader, the reader downloads historical and recent content (text, video, pictures, podcasts, torrents, etc.) from this link, and automatically visits this feed regularly for updates.

Web 2.0 products such as Medium, GitHub, Reddit, Substack, GhostMedium, GitHub, Reddit, Substack, Ghost, etc. all use the RSS protocol. However, the centralized business operation model lacks an incentive mechanism, which will cause problems such as privacy leakage, lack of content ownership, and public opinion manipulation.

• Core Value: RSS3 integrates blockchain technology and RSS protocol, aiming to change the data control and capitalization method of traditional social platforms, build a transparent, open, and scalable decentralized information distribution protocol, and finally return the content ownership to users themselves.
• Transparency: The RSS3 standard and protocol itself and all other supporting layers, such as hosting and indexing, are open source, and applications that use the RSS3 protocol are encouraged to be open source as well, so developers can take advantage of these various open source protocols and huge data sets within the ecosystem.
• Data sovereignty: data is stored on a decentralized network, and the ownership and private key of the information are completely controlled by the user.
• Openness: The scope of information aggregation is oriented to the entire internet. As long as there are applications that follows RSS3 standard, RSS3 can automatically aggregate information according to user preferences and publish it on the RSS3 feed; RSS3 is currently working closely with several DApps (such as Mirror) to provide tracking subscription services for applications.
• Modularity: The process of creating, storing, distributing, and presenting a message flow as a particular message is all done in a modular way by a decentralized protocol rather than a monopoly platform, allowing users to create a message on any terminal of their choice and store the message on any decentralized network they like, the message is distributed using a transparent distribution protocol, and eventually this information will be presented by any terminal to another user.
• Product Features: RSS3 is an open-source protocol for information flow aggregation
• When a user is using the RSS3 application, the application will create an RSS3 file to associate the user’s Ethereum address, Web 2.0 account and other information, and will obtain on-chain assets (ERC-20 Token, NFT) according to the Ethereum address, and obtain social activities according to user;s Web 2.0 accounts such as Twitter(data such as retweets and likes); the application will store the above data in the RSS3 network in a decentralized storage layer, so as to realize the content published by the users is returned from the Internet giant to the users themselvs.
• When the users visit the Dapp, the front-end submits the request for information flow aggregation to the entire RSS3 network. The global indexer (GI) composed of relay nodes (RN) processes the data request, and then the service node (SN) distributes content and sends it back to users. The information transmission between nodes is through RPC, and between nodes and users through REST API/GraphQL.
• Application developers can easily call the information in RSS3 files through API to create different types of applications.
• Revery, Cheers, rss3.io etc. are front-end application products using RSS3. Users can log in through their wallet address, and the application will automatically aggregate and present the user’s on-chain footprint, forming their own exclusive honor wall; users can also interact with others (subscribe, like), thus forming a decentralized Dapp that can subscribe and associate with each other.
• Team Background: Founder Joshua has been working on RSS since 2018
• Token Economics: The $RSS3 Single Token Model

The total supply of tokens is 1 billion, of which 64% will be allocated to the community, 15.4% to the team, 4.6% to seed investors, 10% to private investors, and 5% to Natural Selection Labs , 1% is allocated to advisors.

All holders of $RSS3 can participate in RSS3DAO voting, and the decision includes global indexer and service node election, the maximum number of RSS3 files that a single service node can run, module upgrades, node incentives and penalties, and the use of treasury funds.

💡 Highlights:

1. Users can subscribe autonomously, which can promote the dissemination of high-quality content.
2. RSS3 can not only aggregate on-chain information, but can also aggregate Web 2.0 information on the applications that conform to the RSS standard.

💡 Limitations: Currently, only content of applications that conform to the RSS standard can be aggregated and displayed on RSS3.

6.4 SocialFi Application Layer — Direct communication

Features: The social activities focus on one-to-one interaction in the form of KOL and their fans club（such as rally.io), or direct message between people with the same attributes (such as Nansen Connect).

Rally.io

• Overview: The social token issuing platform is deployed on the Ethereum side chain (Rally Blockchain), allows KOL/creators to issue personal tokens and NFT and customize the utility of the token. Fans can purchase creators’ tokens to support their favorite creators and receive special benefits determined by the creators；
• Core Value:To help creators form their own fans communities, to help creators communicate effectively with fans, and to help fans pay for creators’ effort essentially；
• Team Background: Founder Kevin Chou is from UC Berkeley Business School, other main members are from UC Berkeley and investment banks such as Citi；
• Token Economics: $RLY

The total supply is 15 billion and the vesting period is 8 years. 50% for network participants rewards( $RLY distribution according to Creator Coins ownership), 20.4% for community treasury, liquidity incentives, etc., 15.3% for investors, 14.3% for teams.$RLY is required to issue personal tokens，but the platform does not share revenue from KOL;

• The relationship between the supply of creator coin and $RLY is defined by the Token Binding Curve (TBC)

💡Highlights: As the first one to propose the concept of personal token, the platform has been made brave innovations in product functions and token economic models, with nearly 300 celebrities’ Socialfi tokens available for users to choose from, as well as celebrities’ exclusive NFT to purchase.

💡 Limitations:

1. Limitations of content: At present, only the middle-level and long-tail creators are willing to enter. The top KOLs in real world are supposed to be wealthy, so there are no drive for them to issue tokens for additional cash.Therefore, KOLs with the ability to produce high-quality content has not entered Rally platform yet;
2. Limitations of monetization: Creator Coin can be converted to $RLY and then “bridged” from Rally’s side chain into their Ethereum wallet. Such transactions may be subject to compliance reviews and the limit of time and amount.
3. Limitations of forms: Social events and fan management rely heavily on traditional Web 2.0 applications, such as using Discord bots to read users’ token balances and unlock information to certain groups.

Nansen Connect

Source：https://www.youtube.com/watch?v=I_E_hgRBip0

• Overview: Nansen Connect is a Web 3.0 crypto messaging platform launched by Nansen, an on-chain data analysis platform.
• Core Value: Bring people with similar tags together in a vertical community channel , provide the precise social integration through on-chain labels
• Product features:
• Users can log in using their encrypted wallet, choosing a label based on Nansen’s wallet label.

• After joining a group based on the number of cryptocurrencies held and on-chain behavior tags/labels, users can send DM to other users (using end-to-end encryption), and thus OTC channels can be established to achieve more efficient transactions in the future.
• The Beta version will launch Smart Money and Blue Chip NFT Holder channels and will expand user access over time.
• Team Background: Alex Svanevik as CEO, formerly Coinfi’s chief data Scientist

💡 Highlights:

1. Explore the value of on-chain behavior analytics and label those data in the social space;
2. Build partnership with famous communities such as Millionaire Club, Rare NFT Collector.
3. Launch with special Club channels for clubs like Pudgy Penguins, BAYC, etc

💡 Limitations：

1. Nansen connect is not an on-chain dapp, the server is at a single point of failure(SPOF). After the server is shut down, chat history may be lost.
2. Compared to Discord, Nansen connect has higher barriers to use since it requires uares’ corresponding behavior tags before they can join the channel.

6.5 SocialFi Application Layer — Community

Features: Social activities focus on the one-to-many interaction; With content as the carrier, the platform provides a series of tools for people to form communities based on common topics. Social activities promote the spread of quality content and emphasize community self-operation.

Mirror.xyz

• Overview: a decentralized writing platform on Ethereum; Through wallet address and ENS domain registration, authors can store their articles as NFT permanently on Arweave. Readers can purchase the NFT as a collection. It also provides creators with a token issuing tool to crowdfund their articles.
• Core Value: Provide new ways for creators to monetize their content, so that creators can have direct ownership of their work and benefit from it.
• Product features
• Publish articles: you can use built-in online editor, and also support the one-click import of articles from the external.
• Crowdfunding: Anyone can initiate or participate in crowdfunding through Mirror
• Cooperative sharing: a method of automatically sharing creation value with multiple entities.
• Dao: Mirror can quickly start a Dao and provide a series of tools like voting proposals, token snapshots, multiple signatures, proxy voting, and other functionalities.
• Permanent storage: users can built articles published on Mirror into NFT which are permanently stored on Arweave and are attached unique on-chain address at the bottom of the article.
• Team Background: Mirror was founded by DenisNazarov, a former a16z partner
• Token Economics: $WRITE, the only way to join the Mirror DAO is to burn a $WRITE. $WRITE is not currently available for public sale and is invitation-only. Only top 10 entries in the WRITE Race each week will receive this invitation.

💡 Highlights: The content monetization way of Mirror encourages creators to migrate from Web 2.0 to Web 3.0, while facilitating the production of high-quality content.

💡Limitations:

1. Lack of functionalities such as search, likes, comments and reward;
2. Post article in the form of NFT to Ethereum mainnet, the gas fee sometimes is too high during network congestion, user experience will be affected
3. The cost of minting NFT articles is high (gas fee is too high during network congestion). If the creators set NFT prices too high, it is not helpful for rapid dissemination of content. And ENS domain name has limitations.

Monaco Planet

• Overview: Twitter-like social platform featuring “content mining” on BSC
• Core Value: content mining; users can get rewards from content creation and thus improve the ecosystem prosperity
• Product features:
• 80% of $MONA released weekly (linearly vesting over 8 years) is distributed to users who stake $MONA for content mining
• Users can post, search , follow, like, comment, and DM other users,show off NFT, etc
• Team Background: Co-founder is an international student from UC Berkeley and USC
• Token Economics: $MONA

The total supply is 1 billion. 55% for content mining, 15% for strategic investors, 20% for team and seed round investors, and 10% for ecosystem development. Utility:Governance token

💡 Highlights: Team has strong marketing capabilities. At the early stage, Monaco planet only admitted Yacht NFT owners and those with reference code to join the platform. In a short time, Yacht NFT’s floor price on OpenSea increased from 0.09 ETH recently to 0.5 ETH, and a reference code was bid up to hundreds of dollars.There is a special section on the platform for users to display the purchased NFT, which increases the usage scenarios of NFT and satisfies users’ social need of showing off.

💡 Limitations:

Without a reasonable mechanism for controlling the quality of the content of the creator, a large number of users are in collusion with each other to produce low quality content in order to get rewards. Poor attention algorithm and net asset value algorithm make the whole home page monotony, cause a large number of participants output junk content and thus lead to less attractive.

6.5 SocialFi Application layer — Social club

Features: Focus on group of people with the same needs and interests. Users interact with each other in the form of point-to-group and group-to-group based on the rules set by the club.

Friends With Benefits

source：https://www.fwb.help/

• Overview: A membership and high-value community DAO brings together people with similar interests, topics, and goals to host concerts, develop projects, envision digital art, learn cryptography, and etc.
• Core Value
• A high quality and fraternity atmosphere community that caters to social needs and a sense of class belongingness
• The experimental value of DAO, a new social organization
• Product features:
• Requirements: written application + holding certain amount of tokens
• Review criteria: personal information, professional background, work experience, social media account;Artists, musicians, creative thinkers, practitioners and members deeply involved in Web 3.0; all information reviewed by a 15-member committee. The pass rate of applications is less than 40%
• Admission: $75 FWB (~ $1,300) for a Universal membership, which gives you access to all Discord channels and content, access to various online and offline activities and governance rights; For 5 $FWB (~ $85), local members can participate in the city’s offline events and Discord channel
• Seven active community areas including 1) public area (chat and self-introduction), 2) learning area (understanding Web 3.0 related knowledge), 3) trading area (trading opportunities of Crypto and traditional investment market), 4) NFT area (a series of topics about NFT learning, production and promotion), 5) Creative area (art, music creation and development, etc.), 6) Quality living area (food, reading, fitness, etc.), 7) Administrative area (community governance topics)
• Five activities categories, including 1) Coffee Time (invite guests from all walks of life to share ideas and inspiration), 2) Seed Club (cooperate with podcast and DAO Seed Club to share Web 3.0, 3) Max Pain (talk about investment topics), 4) Into the Weeds (about Crypto space and different themed) 5) Lifestyle Hours (about Web 3.0 and culture combination)
• History: Founded in September 2020, currently has 3,000+ active members, of whom ~10% are core contributors
• Team Background: FWB contributors are made up of members from around the world, with a core group of 400 people.
• Token Economics: $FWB
• 59% circulating, 35.6% community treasury, 19.9% ​​team, 4.4% providing liquidity.$FWB tokens utilities include community tickets, governance votes and participation events; Community contributors are rewarded with tokens
• Community contributors are rewarded with $FWB tokens
• $FWB can swap with most major currencies on Uniswap.

💡 Highlights: The barriers of entering is high which can filter out the high value users to maintain the qualities of community.

💡 Limitations: Email registration is used to define identity. However, due to the lack of a universal on-chain governance system and DAO organizational management practices, the registration system needs to explore a reasonable DAO governance scheme. A 15-member committee is too centralized.

Whale

Source: https://whale.me/

• Overview: In May 2020, Whale Shark created the Whale Vault community with approximately 20,000 active members. $Whale token value is based on NFT assets held by Whale Vault. The valuation can be viewed at http://NonFungible.com. Whale Vault is managed by Whale DAO;
• Core Value:Use tangible and rare NFT assets as an endorsement for $WHALE, and seek a balance between wealth preservation and growth speculation through a basket of high-quality NFTs.;
• Mechanism functions: As the largest digital art collection in the world, WHALE Vault invests in digital art, digital real estate, digital game assets and other digital collectibles. WHALE Vault is also the largest art collection vault by Pak, Hackatao, XCopy and many other first-class digital artists and designers. Among The vaults, NBA Top Shot has The largest share at 74%, The Sandbox’s NFT at 2%, SuperRare at 13%, Gods Unchained at 1%, and CryptoVoxels at 2%.
• Tokenomics: $WHALE token model
• The total supply is 10 million, 10% for team,42.6% for community (40,000 $WHALE released per month for NFT acquisition, donations to artists, team salaries, community events, etc.; all are recorded through Discord), 10% for investors, 37.4% for foundation.
• $WHALE holders can benefit from Vault and projects, including NFT rental, airdrops, exclusive information, liquidity mining rewards, WHALE DAO voting governance, and communication opportunities with WhaleShark.
• plans to add value to the vault by buying more NFT with any proceeds from the sale or rental of the vault’s assets.

💡 Highlights：

1. Whale Shark predicted that 99% of current NFT projects will fail, which is why Whale dao tends to collect NFTs that have longer life cycle and be able to get through market up and down.
2. Whale Community DAO is the first DAO that can manage such a large scale of assets by community members. Dao vote to decide whether to buy or sell a NFT, and improve the correctness of decision

💡 Limitations: The distribution plan for 40,000 $WHALE per month is not clear.

7. The Current Development Limitations of SocialFi

7.1 Underlying infrastructure limitations

1. Technical: The underlying infrastructure, such as cross-chain technology, distributed storage, and decentralized privacy computing, is not yet fully mature. The underlying structure of each public chain is different. The communication between public chains requires cross-chain technology to interconnect and interoperate, and this will also involve the risk of security and iteration of cross-chain communication. There is no perfect solution for the impossible triangle of public chain.For socialfi to prosper and develop, a mature infrastructure is a necessary condition.
2. Governance level: Some governance mechanisms of DAO are too complex, Community’s popularity and the engagement of user participation need to be improved.

User level:

1. The switching cost of social software is extremely high: when users are used to Web2 products while the barrier to use the web3 products is high and the product experience is poor, users still stay in Web 2.0 due to social comfort zone and software operation habits.Therefore, it is difficult for users to migrate to Web 3.0.
2. The explosion of Web 2.0 social media came after 100 million users’ presence. Currently, Ethereum has 180 million addresses and less than 1 million active users, while OpenSea has less than 25,000 active users.

7.2. Limitations on Social side:

1. Lack of social belongingness: When users have got used to web2 social experience which embodies a sense of belonging from the real world，while most of web3 social networking needs to be registered through crypto wallets. Because of its anonymity, it’s hard to obtain social experience with physical belonging.
2. Immature social protocol: Although there are many players and capital flowing into socialfi market, mature social protocols are hardly standing out or have accumulated a large number of users. Many of the protocols are still at the trial-and-error phase.
3. Privacy: At present, there is no pluggable privacy solution. The social records that users want to delete, such as comments, follow/like NFT, cannot be revoked, and the traces on the chain will also be permanently saved.

7.3. Limitations on Defi side:

1. Immature business model: A successful SocialFi product needs to meet the defI needs of users. Currently, there are few highly liquid socialfi tokens, and the financial returns can not let the creators make livings, which cannot encourage them to continue to create, and make this a virtuous circle.
2. The fairness of Web 3.0 needs to be redefined: Social tokens have created a more liquid and more direct capitalization method for the top creators /KOLs, which is bound to cause a new round of social Matthew effect. Resources and attention will be concentrated more quickly along with capital, and the wealth effect will be concentrated on top KOLs.
3. Immature economic model:Currently, the value capture methods of SocialFi projects do not form a virtuous circle, and the incentive mechanism to motivate participants to provide high-quality content and social interaction is not reasonable, result in low quality of content.Therefore, we need to define the criteria of good content and improve the incentives for high-quality content and effective social interaction.

8. A successful SocialFi product should have the following characteristics:

1. Low cost：affordable gas fee for ordinary users
2. Smoothy experience of Web 3.0 product ; low threshold to use; fully functional and innovative;
3. User data synchronization is timely and comprehensive(can integrate on and off the chain information)
4. Innovative marketing strategy and a fast dissemination mechanism;
5. Effective token economy ; give full play to the role of social tokens in projects’ ecology ;
6. A continuous incentive mechanism and mature community to strengthen user engagement
7. Integrate with other verticals to realize more use cases; for example, collaboration with Defi protocol and give credit lending among community group members;
8. The product itself addresses Web 3.0 needs besides Web 2.0 pain points

9. Vision: The future of SocialFi

Web 3.0 social networks can solve the problems of data ownership, data privacy and profit distribution in Web2 social networks.

In the wave of Web 3.0, users can own their content without relying on a centralized platform; But more infrastructure is needed, such as DID and SBT.

In traditional centralized social networking platforms, account registration requires real user information, and the centralized storage method is extremely easy to leak privacy data

Unlike traditional ID systems:

9.1 DID (Decentralized identity system) provides data ownership, data privacy, and data convenience with blockchain technologies. In the framework of DID, people can have a digital identity which contains all the information and can be managed without third parties, rather than multiple digital identities provided by multiple centralized platforms. DID does not allow any individual or organization access and use personal information for any purpose without the consent of the owner. People will be able to show themselves as they move from one cyberspace to another. On any platform, all their creation , contribution and earnings reflect their preferences and experiences. This will bring us closer to how things work in the physical world — property and reputation are about ourselves, not platforms that we can carry around and use at will.

9.2 SBT based on Vitalik’s latest idea — — a decentralized society (DeSoc), is a Web 3.0 social identity tied to the user’s soul. Using non-transferable SBT held by “souls” (i.e., accounts) as a way to build a Web 3.0 social network, these relationships are encoded by tracking the “commitments, certificates, and connections” of “souls” on chain.

Why SBT is needed: According to A16z Jad Esber & Scott Kominers A Novel Framework for Reputation Based Systems: (https://mirror.xyz/easthash.eth/dkuSc8Ryw056eSlee1fzowBPjcfbAxk3XqfBt4Z-mxs), if token can be easily transferred, those who don’t have a reputation can simply buy it, thus token cannot signal reputation.” Thus, in the future we need SBT to play its own role as a reputation signal.

9.3 Possible applications of DID and SBT in Socialfi:

• zero-collatreralized lending and community lending: 1) personal credit contained by SOUL(e.g Including personal education, job, income and activity proof)can be used for lending; 2) Credit rating through on-chain information; more transparent analysis of overdue risk; 3) Like the community lending practices pioneered by Muhammad Yunus and Grameen Bank, community members with similar SBT can guarantee each other’s debt. Therefore, community attributes will be enhanced, while new bridges are built between socialfi and defi can expand new business scenarios.
• Private key recovery: a way to avoid “single point of failure”. Based on SBT, trusted members across multiple communities can be assigned to control the private key; SBT can leverage the broadest social relationships to avoid loss of private keys,
• which also amplifies the capabilities and explores business scenarios of the Socialfi Platform
• Precision airdrop: Currently, the precision of airdrop is not enough. In the future, SBT can be a criteria of airdrop(e.g participants of specific event) Based on targeted airdrops, the SocialFi community gains the most value per user.
• **Zero — ZKPs:**Zero proof of knowledge can enable you to reveal some information to the public, but at the same time keeping any private information about yourself. Such information as age and income cannot be shown directly to others, but in many cases it must be verified. The information processed by zero knowledge can be contained on SBT.

9.4 In addition to the underlying infrastructure, we can focus on the potentials on following three tiers of SocialFi :

• Public chain layer: Each chain has its own unique value and ecosystem, and there will be several public chains focused on SocialFi;
• Bridge layer: Based on the interaction between chain and DAPP, a general DID protocol /SBT will be developed to bring more users from Web 2.0 to Web 3.0 and facilitate social communication;
• Protocol layer: Based on off-chain and on-chain data, user portraits can be obtained by data cleaning and analysis, and content recommendation can be automatically delivered. Meanwhile, user engagement, stickability and retention rate can be determined according to the on-chain data of users. There is a lot of room for growth in protocols which can achieve further smaller the granularity of data and provide different perspectives on data analysis;
• Application layer: Platforms that allow members to discover and connect with each other, complete the social graph through interest and vertical communities (communities that can further engage around specific topics or events) will be the fastest growing platforms.

10.Conclusion

Most of the current SocialFi products can only meet the pure on-chain social and financial needs of Crypto native, and there will definitely be more SocialFi products that can meet the requirements of ordinary people in the future. It will not only meet the social needs of on-chain experience that can mirror the real world off-chain, but also meet the Defi requirements superimposed on social needs. A SocialFi product like this can help us find ways to incorporate real-world social interaction into the activities we love, help us find hobby communities from video games to music to exercise, and be rewarded with tokens. When a pleasant socialfi experience and basic interpersonal relationship ingeniously combine together, a socialfi product will become very powerful. Ultimately, we hope to find a real and positive way to build mutual connections in the Web 3.0 world.

References

https://medium.com/ixfi/socialfi-what-is-it-and-how-does-it-affect-social-media-as-we-know-it-8c28c023a00d

https://growfollowing.com/socialfi-statistics/

https://coinyuppie.com/socialfi-the-key-technology-changing-the-globalization-of-the-blockchain-industry/

https://medium.com/coinmonks/what-exactly-is-socialfi-is-this-a-new-cryptocurrency-trend-1d2bf209dd99

https://www.tuoluo.cn/article/detail-10096741.html

https://blockcast.cc/news/an-overview-of-the-socialfi-ecosystem-social-dao-and-governance-tools/

https://mirror.xyz/jojonas1.eth/tRejExcZGdNXh-FKYn_39Euo-htO6iHqiydbsIO9tr4

https://mp.weixin.qq.com/s/ta8yw7Z3K1QeKKzZQOa2eA

https://mirror.xyz/dere.eth/NuFZrRiUZMvMOlj02LUxIuzZbzeebZXcmKworQ21sHI

https://future.com/power-of-social-community/

https://a16z.com/2020/12/07/social-strikes-back-fastest-growing-apps/

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