Look at NFT from another angle: a new type of social network

In the past few weeks, the price of the NFT section has soared, with CryptoPunk in an absolute leading position.

CryptoPunk is a 24 x 24 pixel image NFT, the total is limited to 10,000. The most expensive one sold 4,200 ETH in March and is now worth more than $7.57 million.

If you want to buy a CryptoPunk now, you must prepare at least 51.85 ETH, which is still the floor price. At this price, you can only buy a very ordinary CryptoPunk. If you want a rare CryptoPunk, you have to pay more ETH.

About CryptoPunk, you need to know a few more points:

1.CryptoPunk has become a status symbol , and owning it is like owning a Ferrari or an expensive bag.

2. CryptoPunk owners often use these punk images as their avatars on social media.

3. It is very low to use a CryptoPunk that does not belong to you as an avatar.

Last weekend, hundreds of people changed their avatars to the same one- Zombie Punk, a zombie punk image.

Look at NFT from another angle: a new type of social network

This image was sold for 1201.725 ETH (worth $3.75 million) at the auction last Friday. However, no one would be dissatisfied with so many people using the same avatar, because they are the owners of this avatar -they participated in the PartyBid auction in the form of a group, pooled the funds, and photographed this value. A million-dollar punk avatar to fight the wealthy giant whale. They called themselves the “Party of the Living Dead” and won this confrontation.

PartyBid makes NFT more social. It uses the form of partying to give hundreds of people the opportunity to buy, own and manage expensive NFTs together. The social nature of this website is obvious. The webpage will display the moving mouse cursor and the comments made by users in real time. In the auction last Friday, hundreds of people participated, and the screen was full of moving cursors and emojis. The scene was very spectacular. This feeling is difficult to describe in words, you can go and see for yourself.

Look at NFT from another angle: a new type of social network

Not long ago, NFT was declared dead countless times and was once regarded as a “zombie”, but what is the situation now?

In the past few weeks, the meta-universe has been widely discussed. Venture capitalist Matthew Ball published a series of 9 meta-universe articles. Microsoft CEO Satya Nadella talked about the corporate meta-universe, and Facebook’s Zuckerberg and his colleagues talked about countless dimensional-universes.

Undoubtedly, NFT will play an important role in the meta-universe. When everything is digitized, proving that you own something and can carry it with you via the Internet becomes the key. But this is not about the meta universe, it is a problem at the level of social networks.

NFT is more and more like a new type of social network, surpassing other social networks and communities-a bit like a super universe. When it comes to evaluating social networks, there is nothing better than the framework proposed by Eugene Wei in “Status-as-a-Service” (“StaaS”).

1. What is “social status as a service”

Eugene Wei, once worked as a product manager for Amazon, Hulu, Flipboard and Oculus, and is also an excellent technology critic on the Internet. What he writes is very classic, and his “Social Status as a Service” written in February 2019 may be the best work so far. The following will summarize some key points related to this article.

Eugene Wei started with two interpretations of human nature:

1. People are monkeys who pursue social status

2. People want to get the most social capital in the most efficient way .

Few people would question the above two statements, but almost no one analyzes current social networks from the two dimensions of social status and social capital . Unlike money, which can be measured by numbers, it can be well analyzed.

Most of the social networks we know well, the social capital they generate far exceeds the financial capital they actually generate, especially in the early stages; almost all of these companies have accepted the popular argument in Silicon Valley: in the early stages, companies should postpone revenue generation , And quickly expand the coverage of the network. These are all related to social capital. Although we cannot quantify social capital, as a sensitive social animal, we can still perceive its existence. This is because:

“In many respects, social capital is an important indicator of financial capital , so the nature of social capital has also attracted much attention. It is not only a good investment target or business practice, through analysis of social capital dynamics, it can also explain various seemingly non- Rational online behavior.”

Eugene Wei used less than 1,000 words. Two years before the NFT frenzy broke out, he inadvertently laid the foundation for the analysis of what is happening now.

NFT blurs the line between social capital and financial capital. As the media often points out, it seems irrational to buy a JPEG (a format for pictures) for thousands or millions of dollars.

Those who deny NFT make the same mistake as Eugene Wei pointed out that people make the same mistake when analyzing social networks: ignoring the importance of social capital.

For a long time, people have used Metcalfe’s law to explain the law of development of social networks: “The value of a network is proportional to the square of the number of connected users.” According to Metcalfe’s law, the more users a social network has, The greater its value to each new user.

The problem is that Metcalfe’s law cannot explain what happens in the real world well. Metcalfe’s law predicts that no matter which network grows first, it will become the most valuable network for each new user, thus creating an insurmountable lead. However, after Facebook replaced MySpace, Instagram and Snapchat still robbed young users of Facebook’s attention. People’s preferences are not clearly captured.

This is not to say that Metcalfe’s Law is wrong, but it does not capture the exact reason why people use social networks. This is not just a matter of mere utility, so Eugene Wei proposed a new framework to add social capital to Combinations to analyze the power of social networks.

Look at NFT from another angle: a new type of social network

Eugene Wei assesses the strength of social networks from three dimensions: social capital, entertainment and utility. Here we can simplify, just look at the two axes of social capital and utility.

The utility is relatively easy to understand: if you can find answers to your questions on Quora, or easily reach your high school friends who have lost their phone numbers on Facebook, then these products are providing you with utility.

Social capital is more difficult to measure, it depends on whether to create a “successful social status game.” To explain why some new social networks succeed and others fail, he uses an analogy: cryptocurrency.

He said that the new social network is very similar to ICO:

1. Every new social network will issue a new form of social capital, just like a token.

2. You must have a workload (proof of work) before you can get tokens.

3. As time goes by, it becomes more and more difficult to mine new tokens on social networks, resulting in inherent scarcity.

4. Many people, especially older people, will laugh at social networks and cryptocurrencies.

This is a good analogy. Take Bitcoin and Twitter as examples.

1. Bitcoin issues BTC tokens and Twitter “issues” followers.

2. Miners obtain Bitcoin to ensure network security. Twitter users only need to post humorous, interesting or exciting things with texts within 140 to gain followers.

3. The cost of mining bitcoins is now higher than before, and the difficulty of mining bitcoins will continue to increase before all 21 million BTCs are mined. In the early days of Twitter, you could get attention by tweeting what you ate for lunch, but now, people are starting to pursue longer content.

4. This is particularly obvious.

15 years ago, Bitcoin and Twitter did not exist. Now, both have become forces that cannot be ignored. They reward early adopters, motivate them to work for the network, and make mining new tokens increasingly challenging.

It is important to understand these four points, the most critical of which is “Proof of Work”.

If every Twitter user has 1 million followers as soon as they sign up for an account, then becoming a big V will not form any social capital. The scarcity of millions of fan accounts makes them more valuable, and it is proof of work that causes this scarcity.

Aside from entertainment, Eugene Wei talked about the 5 curves that social networks follow, 4 of which are the trade-offs between social capital and utility over time:

Look at NFT from another angle: a new type of social network

The first is “utility” first, then “social capital”

There is a good saying, “come for the tool, stay for the network.” Instagram initially attracted users through a simple P-picture tool, and later became a photo-based social network on which people attract a large number of followers and carry out business cooperation.

The second is “social capital” first, then “utility”

Eugene Wei emphasized that Foursquare, Wikipedia, Quora and Reddit are using the promise of social capital to let people do free work, and then evolve into practical tools for the public.

The third type, only “utility”, no “social capital”

Instant messaging apps are very useful in communicating with people you know, but they don’t really help users build social capital.

The fourth type has only “social capital” and very little “utility”

Eugene Wei classifies Facebook into this category. He mentioned that many friends around him have disabled Facebook, and it has no effect on their lives.

The fifth type, possessing both “social capital” and “utility”

To find an example, Eugene Wei used WeChat, which combines a Facebook-like Moments dynamic (social capital) and many practical functions. “People use WeChat to send messages to friends, shop, read news, play games, pay in physical stores…Almost everything you can do on your mobile phone, you can do it on WeChat.”

WeChat has created a killer combination of “social capital” and “utility” from the very beginning, which has not been truly replicated in the West.

Nevertheless, Eugene Wei pointed out that even good social networks are limited by two asymptotic lines, which either stop growing or lead to a complete collapse.

Social Asymptote 1: Proof of Work

Not everyone is willing to gain social capital on social networks, which creates an upper limit. I am fascinated by TikTok, but I have never made TikTok, because I am not very good at dancing, and I am not willing to put in any amount of work to do what the TikTok algorithm needs. TikTok is still growing at an alarming rate, but if even someone who loves social networks like me no longer uses it, it will definitely face a ceiling.

Social Asymptote 2: The expansion and devaluation of social capital

When a social network becomes more and more successful and a large number of users are using it, the company behind it will inevitably introduce algorithms to maintain the high signal-to-noise ratio of most users. This is to resist “bloat”. But the problem is that by doing this, every follower is no longer able to see every post of the blogger, and most of the reliable information may be reduced to ashes.

From a devaluation perspective, as more and more people join, social networks may become less cool. A classic example is what happened when parents started joining Facebook: Many young people left Facebook and switched to Instagram and Snapchat. Once the fashionable children start to leave, the less fashionable children will leave soon, and then the next group, then the next group, as more and more unfashionable people (or parents) join, fashionable The ratio will soon decrease.

At this point, Eugene Wei warned, “The product or service had better be sufficiently effective in terms of effectiveness, otherwise the head user’s departure would greatly hurt their vitality.”

This is the core of the argument:

1. Analyzing social networks requires more than just their network effects.

2. There are three analytical indicators: social capital, utility and entertainment.

3. New social networks are like ICOs, especially those that use proof of work of appropriate difficulty to create scarcity.

4. There are many paths that social networks follow, but the best is to have higher social capital and utility from the beginning.

5. Even a successful social network has two asymptotes: the proof-of-work ceiling and the inflation/devaluation of social capital.

6. Networks that start with high social capital need to figure out how to build utility before reaching the asymptote.

In the rest of the article, Eugene Wei gave many examples to add rich content to the paper. Here, in order to save time, only a few points related to this article are put forward:

1. Social capital can be used as temporary energy. “You can use social capital as an incentive bait to get everything you need in your business model.”

2. The new workload certification will extend the social status competition game. By adding new proof of work, new potential social capital is effectively created for users to tap. Casino games in Las Vegas are played for real money, attracting players with an attractive ROI. Some massively multiplayer online role-playing games also provide players with other benefits, such as a sense of community belonging, whose life cycle is generally longer than pure skill games.

The simplest scenario for measuring social capital is that people use social capital to directly exchange financial capital. “These transactions directly reveal the value of social capital. For example, a high-level World of Warcraft account can be sold on the open market to see how much it is worth.”

“From the standpoint of social networks, restricting the transplantation of social relationships is necessary, but from the user’s point of view, it is frustrating. One way to curb those social giants is to require users to transfer their social relationships to Go to other networks. This will weaken the power of social networks in the dimension of social capital and force them to compete more in the dimensions of instrumentality and entertainment.”

This is particularly pertinent, as it points out the main difference between traditional social networks and NFTs. If there was a more portable and decentralized social network, what would you choose? Now we return to the topic of NFT.

2. Brief introduction of NFT

Let’s briefly review the history of NFT.

NFT stands for non-fungible tokens. The power of NFT is that it makes digital assets scarce. Scarcity makes digital assets valuable, just like supercars, artworks or rare stamps. If there is no way to prove that what the user bought is genuine, the artist Beeple’s “Everyday” will not sell for $69.3 million.

Look at NFT from another angle: a new type of social network

In 2017, CryptoKitty introduced the concept of NFT, but NFT really became popular in early 2021. Beeple and NBA TopShot led the way, while Bitcoin and Ethereum set record highs. The emerging crypto tycoons did what the rich would do: buy art. But many people are skeptical of NFTs, thinking that these are just toys.

Then, in April, cryptocurrency prices fell, and NFTs also cooled down. Some voices said, “Look, when people start to spend millions of dollars on JPEGs, I know it’s a bubble!”

In June of this year, the encryption website Protos and many blogs published similar articles, citing data that dropped by 90%:

Look at NFT from another angle: a new type of social network

The second sentence of this article is: “NFT reached its peak on May 3 and sold $102 million in just one day.” However, the party officially ended. “According to Protos data, NFT sales in the past week Only 19.4 million U.S. dollars.”

One month later, something interesting happened. NFT makes a comeback. In the past 24 hours alone, the two markets, OpenSea and Axie Infinity, have generated $106 million worth of NFT transactions.

According to data from DappRadar, in the past 30 days, the top ten NFT market transactions reached 1.86 billion U.S. dollars.

Look at NFT from another angle: a new type of social network

This time, it feels as if NFT is pushing up the prices of ETH and BTC, not the other way around.

So why does NFT make a comeback, and why does it exist for a long, long period of time?

3. Why NFT can make a comeback

Let us return to what Eugene Wei said.

1. Investment is social status

Recall the two points raised by Eugene Wei:

  • Man is a monkey who pursues social status
  • People want to get the most social capital in the most efficient way.

This is a very complicated fact. Those of us who are pursuing social status are turning to digital monkeys, hoping to obtain the most social capital in the most efficient way.

In this wave of NFT market, Bored Ape Yacht Club (Bored Ape Yacht Club) was the first to launch an offensive.

In the past month, the third-ranked NFT was Bored Ape Yacht Club (“BAYC”). Like CryptoPunks, there are only 10,000.

Look at NFT from another angle: a new type of social network

BAYC’s website calls itself “a limited collection of NFTs, and the token itself represents your membership in the Ape Yacht Club”.

Look at NFT from another angle: a new type of social network

Unlike CryptoPunks, BAYC is brand new: it was released on April 30 and is now the third most popular NFT collectible, probably because it combines “social capital” and “utility.”

The New Yorker recently wrote an article titled “Why boring monkey heads are occupying Twitter”. The article mentioned: “It has become a kind of status symbol, a bit like high-end watches or rare sneakers.”

Outside of BAYC, apes are still a theme, and two of the four most expensive CryptoPunks in history contain “apes” elements:

Look at NFT from another angle: a new type of social network

If it is irrational for people to spend millions of dollars to buy pixel pictures of apes, then “analyzing the path of social capital” can help explain these seemingly irrational online behaviors.

Therefore, instead of ignoring these things that are becoming reality, it is better to dig deeper and bring NFT into Eugene Wei’s theory.

Look at NFT from another angle: a new type of social network

This is the power of NFTs: they are high in social capital and utility, and they are getting higher and higher in entertainment. They have a triple win on social networks.

First, social capital

In the “investment is social status” game, NFT becomes a kind of social capital. There are currently only 10,000 Cryptopunks and BAYCs. In this limited collection, some of them are of high value and therefore will bring high social capital. Owning a CryptoPunk or BAYC and using it as your Twitter, Discord or Telegram avatar shows some information- you either participated early, or rich, or both rich and early.

The use of high-priced items to increase social capital is nothing new-look at art, expensive cars, yachts, private jets, handbags, or any scarce items purchased by the wealthy to show social status. However, NFT is clearer and more public.

Secondly, utility

NFT can also be used as an investment, as a ticket to enter the Discord group, or even hang on the wall in other forms. As NFT develops and penetrates into a wider audience, owners will gain more qualifications for event participation and a more unique experience.

Buying BAYC has allowed the owner to enter the Boring Ape Yacht Club. NFTs like Axis provide real utility: provide employment opportunities for thousands of people. The Meebits in the picture below, from Larva Labs, the creator of Cryptopunk, has 3D models and animations that can be used as characters in the game.

Look at NFT from another angle: a new type of social network

Third, entertainment

Although Eugene Wei did not go into this field in depth, most successful social networks score high on entertainment and the axis. It can be said that TikTok is both a social network and an entertainment network. The same is true for YouTube. Many people lurks on Twitter for hours a day without interacting, purely for fun.

NFT is also very interesting: some people have begun to create virtual characters with apes or punk avatars as protagonists. Auctioning on PartyBid is both an investment and a social event.

The entertainment attribute of NFT has just begun. Punks Comic is creating comics based on 16 punk avatars. More elements will be added in the future and will soon be expanded to BAYC.

Look at NFT from another angle: a new type of social network

Obviously, this is just the beginning. Many NFT supporters believe that major cultural events can be recorded by NFT, and this method itself will also have an impact on these activities.

Therefore, NFT provides social capital, utility and entertainment… Is this effective in Eugene Wei’s view that “new social networks are similar to ICOs”? Considering that they are all projects in the cryptocurrency field, this is simple:

1. Every new social network will issue a new form of social capital, a token.

2. You must first prove your workload (proof of work) before you can get tokens.

3. As time goes by, it becomes more and more difficult to mine new tokens on each social network, resulting in inherent scarcity.

4. Many people, especially older people, will laugh at social networks and cryptocurrencies.

There are some nuances here.

NFT connects social capital and financial capital more directly. One way to obtain NFT is to enter it early, when it is created, or in the early days, when most people are not interested in it yet. Another way is: buy. The former stands for Proof of Work (POW)-figuring out which projects should be involved as early as possible, while the latter is closer to Proof of Stake (POS)-to participate in the project with ETH.

There is also an intuitive commonality between the two: many people, especially the elderly, will sneer.

Even I admit: To become a kind of social network, this seems a little difficult for NFT to reach.

It doesn’t look like a social network. If there is any difference, it is that it is more like a small community, like a supercar club somewhere. However, these small clubs are too small for analysis, and NFT is different, it can bring social status and social capital on a global scale. But compared with social networks such as Facebook, Snapchat, TikTok and Twitter, NFT is a completely different type.

In my opinion, NFT is an emerging social network, and its strategy is effective.

In the article “Social Status as a Service”, there is a chapter titled “Why is it a bad strategy to copy proof of work for social status-driven networks”. Some small changes will not work, because you have not really created a new social status game, so when there are no users on the new network, there is no reason for users to migrate from the existing network.

Although Bitclout belongs to the field of cryptocurrency, it is similar to Twitter and rewards people for doing things on Twitter: saying things that are humorous, funny or smart. The difference is that if you succeed on Bitclout, your tokens will become more valuable and you will also make money. The direct exchange of social capital and financial capital is enough to allow people to transfer their workload to a new platform, which is very challenging for the platform.

The difference with NFT is that it does not require people to leave their existing social networks. On the contrary, if everyone shows off and talks about their NFT on their favorite social network, it is good for NFT holders. This upsurge can generate more demand, and it can also create opportunities indirectly.

If Netflix executives see everyone talking about CryptoPunk on Twitter, they might turn it into a show that rewards owners. If the people at Christie’s auction house saw everyone on Discord talking about Art Block, they might put one of the paintings up for auction, adding credibility and influence to the collection.

Once this happens, NFT holders will build a huge social capital and continue to invest these capital into the network. For example, if CryptoPunk gets a Netflix show, the punks who play the lead role in it may become celebrities by virtue of their own strength and build a larger range of social capital on social networks.

NFT is not a social network in the traditional sense. Without a company, there is no offline place where holders can be gathered. It can only be gathered in blockchain games and virtual worlds such as CryptoVoxels, Decentraland or The Sandbox. Maybe someone will build an anonymous social network and have an NFT to enter. But most likely, it does not belong to any of the above. This is a new thing: Superverse, a super universe.

It does not mean that NFT is a “better social network”, it means that it will be a “super social network” above other networks.

As mentioned above, “from the standpoint of social networks, it is necessary to restrict the transplantation of social relationships, but from the user’s point of view, this is frustrating.” If the regulator forces the social network to make it in social relationships The portability of the above will weaken the power of social networks in the dimension of social capital, and force them to compete more in the dimensions of instrumentality and entertainment.

What if it is not supervision, but a new entrant with natural portability?

You can obtain social status anywhere, own it without platform risk, and carry it with you on the Internet. No matter which platform rises or falls, NFT will not be changed. Any social network with a profile picture is fertile ground for NFT spread. The holders have shown their cryptopunk and RTFKT sneakers on their Twitter avatars or Instagram photos.

It’s not just a few people who do this. Groups with specific NFTs, such as the “Party of the Living Dead”, can migrate to any new platform together, use Discord as a base, enter other new areas from here, and convert 10,000 scarce assets into hundreds of thousands or hundreds A scarce asset backed by 10,000 people.

Eugene Wei mentioned the viewpoint of “coming for the tools and staying for the network”. NFT is the same, it becomes a tool to bring the network to the place with the most social and economic value.

Having said that, it is necessary to make a warning: the price and demand of some NFTs may fall, or even plummet. Recently, an NFT born in 2017-“Ether Rocks” has surged in demand and sold for more than $100,000. The founder of the project also called it “the pet stone of the blockchain industry.” This kind of “resurgence” is a test for the community. Whether this type of NFT has value attributes depends on how strong the community really is.

Look at NFT from another angle: a new type of social network

In other words, NFTs do seem to have some characteristics that enable them to resist the two asymptotes proposed by Eugene Wei.

For the asymptote of proof of work, NFT can add new proof of work to extend the half-life of status games. Eugene Wei cited two examples of successfully extending the life of status games-casino games and massively multiplayer online role-playing games, which have the same characteristics as NFTs.

NFT can simultaneously achieve “using real money to set an attractive game ROI” and “more durable than a simple game skill challenge”.

This means that NFTs only have to face breakthroughs in “encryption technology adoption” and “affordability”. There is no doubt that more innovation will allow NFT to reach a wider range of groups, while retaining the advantages of scarcity, or replacing scarcity with other advantages, such as communities.

For the asymptotic line of “inflation and devaluation of social capital”, the decentralized nature of NFT plays a role. Although some platforms can use algorithms to present certain NFTs, the NFT itself is portable and the owner can choose any place to use and display it.

They are also unlikely to be affected by the evaporative cooling effect on social networks, because NFT is not a single thing-they are a group of small communities, and each community has its own standards.

There are only 10,000 CryptoPunks in the world, but in the end there may be thousands of DAOs and partial ownership groups. Each group has its own standards and rules to form its own small community. This distributed structure will make NFT more flexible.

NFT is still in its early stages. Even me, as a person who likes these things, does not own cryptopunk, apes or other mainstream NFT collectibles. The industry also needs to build more infrastructure and build more structures to connect different NFT projects.

NFT seems to have the right elements to build a new form of social network-a “super universe” on top of existing networks such as Twitter, Instagram, Snapchat, Discord and TikTok, and it will continue to adapt and flourish over time. .

New NFT projects can use the powerful combination of social capital and financial capital as a starting point. Ownership brings social capital, utility and entertainment. From finding the next big event, to creating brand extensions (such as Punks Comics), to marketing specific NFTs to increase the visibility of the entire series. Cryptopunk owners have bought billboards in New York, Miami and London to spread their influence. When money, status, and community are combined, there is a strong motivation.

All this sounds crazy. NFT is not so much a new type of social network, as it is a fashion. Fortunately, Eugene Wei provides us with a framework for evaluating the strength of social networks, and NFT performs very well in this regard. In the article “Social Status as a Service”, there is hardly any refutation of the view that “NFT is a social network”, and evidence to support this view can be found everywhere.

4. Conclusion

The early stage of a major event may be like a toy, and the next large social network may not look like a social network at all at the beginning. The future will be crazier than predicted, and a social network based on JPEG ownership obviously meets this requirement.

So, seeing this, what do you think?

Social networks will reward those early adopters, and a social network with monetary rewards will bring double benefits to early adopters. Go explore, find an NFT that resonates with you, and get involved. At least, don’t be one of those old guys who laugh at NFT.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/look-at-nft-from-another-angle-a-new-type-of-social-network/
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