Web3 social networks need to provide a precious experience beyond monetary incentives for participation, says Johnny Lyu, the CEO of KuCoin.
The advent of blockchain technology allows for decentralizing many concepts. One popular option is creating alternatives to social media networks and rewarding users for contribution and curation. Steemit is one example of how not to approach that business model, although it also offers some valuable lessons for future projects.
Steemit Had Promise
When Steemit first came around, many crypto enthusiasts saw merit in the platform. As a Reddit-esque clone based on blockchain technology, the system would let anyone contribute content and potentially earn rewards for doing so. Users would govern which posts they considered valuable, and the rest would automatically disappear into obscurity. Upvoting and downvoting content is an excellent way to curate third-party contributions.
However, Steemit went one step further by adding a price tag to every post. The price tag was depicted in $STEEM tokens, which were to be awarded to the post’s creator for their submission. Moreover, users who upvote or downvote content would be rewarded too, as the system offered incentives to active participants across the board.
The STEEM tokens served as a governance tool for Steemit too. More specifically, users could earn Steem Power by posting, voting, and sharing computing power with the network. The higher one’s Steem power, the more upvotes or downvotes matter, giving Steem Power owners significant influence over the ecosystem. It was an interesting idea but one of the multiple reasons for Steemit’s eventual collapse.
Fatal Flaw
Linking the voting power and e-user’s crypto holdings – in STEEM< Steem power, or otherwise – was a fatal flaw from day one. More Steem power doesn’t make one user better than any other, nor should it influence how much sway they have on the broader community.
Ultimately, the community split into two camps: one on the Hive blockchain — through a Steemit fork — and one on the original platform.
The power struggle surrounding Steemit shows how tricky it is to build decentralized social media platforms where financial incentives play a crucial role. Introducing a new token is fine and dandy, but combining economic value with governance is not necessarily the smart approach. Moreover, it confirms how founders of such platforms should never be allowed to acquire such vast sums of tokens before launching their product.
Web3 Social Networks: Can They Do Better?
As Web3 is one of the hottest topics today – primarily because it empowers users – one must wonder how future social networks will operate. Decentralization, community-powered, advertising-free, and self-monetization options for content contributors are just some of the benefits one can unlock. However, one cannot be a trade-off for the other, and striking a balance between these different aspects is never straightforward.
Whenever users are rewarded for performing actions on social media – sharing content, upvoting, commenting, etc. – there is also an incentive for bad behavior. Eliminating copycat content or collusion is paramount yet difficult to achieve or enforce. Enabling content creators to make money is a powerful concept, but one should never overlook the potential pitfalls either.
Builders of Web3 social networks need to consider whether a native token is even necessary. Granted, it can serve as a reward, but making it a governance asset is a tricky endeavor. Large stakeholders will try to sway communities and get the entire platform to play by their rules, like what happened to Steemit.
Introducing a DAO-style structure for governance may alleviate some of these concerns. However, Web3 social networks require a threshold to introduce equal voting power to everyone regardless of token holdings. That may be challenging to overcome, but it is not impossible.
Web3: Key Challenges
There is tremendous potential when decentralizing social networks. Empowering users rather than corporations and rewarding them for their attention are intriguing ideas. But unfortunately, services like Steemit confirm how difficult it can be to develop a viable long-term approach to decentralized social media.
Even with the growing focus on Web3, those crucial drawbacks do not go away. More emphasis on rewarding users is positive, but the infrastructure needs to create a level playing field. Individuals and entities will always try to game the system and make it bend to their will. Avoiding that pitfall will be the key challenge for Web3 social networks.
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