Web3 Social Protocol Monopoly and Soul Binding Token

Thesis:

  1. The essence of social products is matching. By building a unified data base, Web3 maximizes the matching ability of applications and improves the efficiency of user information acquisition.
  2. The accumulation of high-quality relationships and network effects needs to reach a critical point in order to form a qualitative change. The process is tortuous and spiraling. The web3 infrastructure just allows the fastest iteration of the new economic governance model.
  3. The theory of “fat protocol and thin application” is not necessarily applicable in the social track. Protocols and applications are under the pressure of homogeneous competition, and it is difficult to form a complete monopoly ecology. Uniqueness is the foundation of competition.
  4. Compared with the existing web3 identity protocol, Soul Bound Token (SBT) has stronger advantages in scenarios such as non-transferable reputation, governance airdrop, negative reputation, wallet recovery, etc.Before the large-scale implementation of SBT, there are many issues such as privacy, security and storage to be solved. It is very likely that SBT will coexist with multiple identity solutions in the future, just like the L1 expansion solution.

Web3 social evolution path

Returning to the essence of social networking, we believe that the essence of all social products is matching, that is, matching information and matching high-quality contacts. For example, people are willing to pay high prices to join high-end offline clubs to get better network resources; people are willing to spend more time on twitter than other platforms, because it can most efficiently push the knowledge you are most interested & needed.

Web3 Social Protocol Monopoly and Soul Binding Token

Compared with Web2 products, the core advantages of Web3 can build a high-performance and unified data base, and use composability to maximize the social matching ability of Dapps and improve the efficiency of user information acquisition.

As described in the previous article “Walled Gardens”, in web3, everyone’s identity, relationship, social interaction, and content creation data should belong to themselves, instead of being separated into walled gardens. The return of data sovereignty will greatly The cost of data reading and use is reduced, and everyone’s on-chain identities and achievements become open and transparent. Dapps can more efficiently discover and contact high-quality contacts and high-quality creators.

However, we are back to the chicken-and-egg problem: the accumulation of high-quality relationships and network effects needs to reach a tipping point to form a qualitative change, and until then web2 social will still be better for most users choose. So, for web3 startup, should we develop high-quality resource providers first, or develop C-end users first?

The author believes that the core should be to reward high-quality resource providers, that is, high-quality creators and high-quality personal connections. For example: Mirror attracted a number of high-quality kol platforms at the cold start, and Phaver selected the best quality creative content by means of content pledge; returning to the Web3 creator economy itself, blockchain has natural advantages and can help high-value people achieve The reputation is realized, and the centralized platform is completely eliminated. Therefore, I am still relatively optimistic about the prospect of web3 social development.

Web3 Social Protocol Monopoly and Soul Binding Token

From the user’s point of view, we really can’t ignore the elephant in the room – everyone is used to using web2 social applications, and the giant’s user stickiness is extremely high. This does not mean that web3 has no chance at all. Just as Gamefi challenges traditional games and Defi challenges traditional finance, social networking can also attract users and rewrite the rules of the game through tokenomics. Further, compared with defi and gamefi, the significance of SocialFi lies in a lower entry threshold, a more universal reward mechanism (everyone can get rewards), and a higher frequency of use by users, allowing more curious young people to wait and see. People provide a web3 gateway, and social networking may be the track with the most potential onboard next 1 billion users.

Of course, the accumulation of high-quality relationships and network effects needs to reach a critical point in order to form a qualitative change. The process is a spiral, which requires continuous iteration of infrastructure, Tokenomics, and the need to attract web3 native residents. Gradually break the circle to attract more web2 users . Only companies that can continue to iterate their products and business models and explore reasonable and sustainable PMFs will survive. The web3 infrastructure allows for the fastest iteration of new economic and governance models, with startups serving as a “hive” to experiment, learn, and grow rapidly. In this process, data/content/relationship is no longer the private property of the platform, the network effect will be accumulated as a public product, and the composability of data protocols will also make each innovation the starting point of the next innovation.

Research on Web3 Social Monopoly

In August 2016, Joel Monegro of the US Fund USV published an article entitled “Fat-Protocols”. The “fat” protocol theory believes that the blockchain and Internet value capture models are different, and most of the value in the Internet era is captured by the application layer, such as Google, Facebook, Amazon, Ali, Tencent, etc. The underlying protocols such as TCP/IP and HTTP that support the Internet cannot capture value. In the blockchain era, the value will be concentrated in the shared protocol layer, and only a small part of the value will be distributed in the application layer, thus giving birth to the “fat” protocol and “thin” application theory.

For most blockchain-based protocols, two factors lead to this outcome:

1. Shared data layer – the underlying data and blockchain transactions have equal and free access rights, and applications will compete with low cost and homogeneity;

2. Token incentives – the protocol can use tokens to capture value to enhance the security of the system (the higher the currency price, the higher the security), and to achieve commercialization.

Web3 Social Protocol Monopoly and Soul Binding Token

But I don’t think the fat protocol theory is a panacea, at least not necessarily on the social scene.

  • Data is not all the competition

First, the shared data bottom layer does not represent homogenous competition. Data barriers are important, but they are not the whole story of competition. Looking back at web2’s social product KSF (except data), the summary is as follows:

  1. WeChat 0 cost texting
  2. Telegram Anti-Censorship
  3. Twitter short tweet
  4. TikTok slips to match
  5. Snapchat burns after reading

In addition to data, product functions, user experience, matching efficiency, and community atmosphere are soft barriers for social applications. Web3 should also add tokenomics to these factors.

  • Competition theory also applies to agreements

In fact, the low-cost, homogenous competition caused by composability described in the “fat” protocol theory applies equally to protocols. Based on the decentralized and open source system, the protocol can also be easily reused, and then optimized products that are more popular with users. For example, when Compound was still an open source protocol, Lendf reused their code for optimization. Then Lendf advanced by leaps and bounds, and the lock-up volume quickly entered the top ten in the industry; the same is true for social protocols. The collection, cleaning and presentation of data on the chain is not a monopoly resource. New entrants can still quickly access various databases. Challenge the existing Industry pattern.

  • What is a reasonable value capture mechanism?

As pointed out by “Fat Protocol Theory”, token incentives are an important way to capture value. In fact, the design of many protocol tokens is unsatisfactory. The core problem is: social networking is a matter with strong network effects. The issuance of tokens by the protocol is equivalent to the beginning of admission tickets for the amusement park, which is both a problem for developers and users. A barrier to entry.

The superstructure theory points out that the ideal basic protocol layer should be free-to-use , at least imperceptible to use on the user side, and this kind of infrastructure can onboard next 1 billion users. The protocol layer should play the role of the Minimally Extractive Coordinators. “The less the protocol extracts in the coordinated exchange, the more economic exchanges will occur for users.”

However, this vision has led to another problem: the demise of the web1 protocol is precisely because of insufficient commercialization capabilities, how should the value creation and value capture of the web3 protocol be reflected.For this problem, I prefer to understand the social protocol as a to-b business and the application as a to-c business. Ideally, the protocol charges the project party and the application charges the user. It is worth noting that the protocol needs to achieve sufficient business scale to start commercialization, and premature commercialization will hinder its development. From this point of view, the application layer may be easier to achieve value capture: they are closer to the user group than the protocol, it is easier to build trust and stickiness, and they can gain user recognition through profit sharing.

The trade-off between token value capture and commercialization is a topic worthy of discussion. The scope of discussion is not limited to social networking. There are also multiple tracks such as public chains, Defi, Gamefi, and NFT. Maybe a special research phase can be published in the future.

  • Dynamic balance of social protocols and applications

The bargaining power of applications and protocols changes dynamically. When an application occupies most of the traffic of the protocol and has to pay a large amount of fees to the protocol, the application will tend to fork the protocol to obtain greater benefits. The phenomenon of “app stealing protocol value”, for example, large-scale Gamefi games have opened their own App-chains.

  • Uniqueness is the foundation of competition

In conclusion, the author believes that both social protocols and social applications are facing the pressure of homogeneous competition, and it is difficult to form a complete monopoly ecology. In such a competitive environment, uniqueness is the foundation of the competition of blockchain protocols and applications. The uniqueness of social projects is reflected in the following points:

  1. Combination ability: In the food competition, there are various top ingredients (storage scheme, data model, identity DID) on the table. ), flavors (core customers, community tonality), cooking skills (commercial landing ability), and innovation capabilities are different, and the final dishes will be ever-changing. Even if it is the same dish, the effect of ordinary people and state banquet chefs is different. Moreover, in the dynamic change of ingredients (data accumulation, technology upgrade), how to capture the best state of ingredients for their own use will also determine the final quality of the dishes.
  2. Token design : If tokens are an inevitable choice for web3 applications to compete with web2 giants, then our focus should be on how to design the x2earn model more reasonably. Just like the Internet platform subsidy war, what we need is not flooding but subsidizing core high-value users and early participants; on the other side of the coin, how should we design the token model so that the token captures the value creation of the community, Instead of a Ponzi fund that simply applies the “governance + utility” dual currency model. Combined with the idea of ​​​​the game, the random drop of equipment, the extension of game externalities, etc. can be used to weaken the simple to earn attribute, and tokens can be used as a tool to design a more reasonable reward mechanism, so that users can return to the fun and enjoyment of social networking itself. The sense of achievement of recognition, the sense of honor of community builder, etc., you can also refer to the Ethereum Foundation to do offline Networking to enhance the bonding between members.
  3. Community atmosphere & product performance: As an open bilateral platform, user data and relationships may be easily replicated, but community atmosphere, product experience and first-mover advantage are more difficult to replicate. Unlike Gamefi, if the earning efficiency of the game becomes lower, some users will choose to copy the disk, and the bilateral platform naturally has user stickiness. If the developer changes a protocol ecology, there may not be such a good user-base, and ordinary users change one. Community does not have such a good community atmosphere and such high information matching efficiency.
  4. Team execution: Good teams are very scarce in Web3, especially in the social field, teams that are closely coordinated, can do technology and understand users, have a keen insight into the market, have strong execution, and are rich in resources.

Soul Bound Token (SBT)

  • What is Soul Bonded Token SBT?

The name “Soulbound” comes from the game World of Warcraft. Soulbound items refer to items that cannot be traded with other players, cannot be mailed or given to other players, and can only be used by players themselves. Soulbound token is a non-transferable token bound to your wallet (account). Any online or offline institution or individual can issue SBT to a wallet, such as the school you graduated from, the company you work for, the public welfare organization you have participated in, the DeFi platform that takes loans or participates in liquidity mining, the DAO organization you have deeply participated in, etc. Wait, your wallet can receive all kinds of SBT.

SBT is non-transferable and non-tradable. This feature weakens the speculative nature of NFT and returns to the essence of social interaction, proving people’s identities, experiences and reputations. Its original intention is to help users obtain persistent identity, trust and cooperation mode in the Web3 world lacking personal credit, reduce the possibility of witch attack (referring to a single user forging an identity to attack), and improve the efficiency of capital utilization.

  • What are the application scenarios of SBT?

Credentials without application scenarios are worthless to users. Compared with other web3 identity solutions, SBT has advantages in the following scenarios:

Non-transferable reputation : SBT cannot be transferred by transactions. In contrast, Lens NFT, Poap medals can be sold on the OS, and OG status can be obtained for dozens of dollars. SBT has higher gold content and authenticity.

Web3 Social Protocol Monopoly and Soul Binding Token

  1. Governance & Airdrop : The core early contributors are screened through SBT and given higher governance voting rights, making community governance fairer and returning to the essence of democratic governance, no longer a purely capital wrestling field. Real experience and identity authentication will help the project party to accurately issue airdrops and efficiently match more real, effective and high-value community contributors.
  2. Negative reputation: If someone does evil on the chain or has a high loan default, he will receive a negative reputation SBT, so that the SBT can become a “Sesame credit score”, users can use social reputation to make loans, and the protocol can give users a negative reputation before lending. Conduct background checks, such as using zk zero-knowledge proofs, to verify that customers have at least no previous default record or excessive leverage.
  3. Wallet recovery: If the wallet private key is lost, it can be recovered by obtaining the approval of most SBT community members, similar to the logic of WeChat account recovery. In contrast, the common wallet recovery method (in fact, most wallets do not have at all) is to designate several wallet guardians, and there is a risk of single point of failure.
  • Does all the user’s identity data need to be on the chain?

Of course our ideal state is an identity protocol that contains all identity information, like a Metaverse in Ready Player One.But there are many problems in implementation:

  1. Difficulty of data storage: It is very difficult to store all data on the chain, possible solution: only upload the hash
  2. Information deletion and modification: In social scenarios, users need to change information and delete historical information at any time, which cannot be done by blockchain
  3. Excessive disclosure problem: data on the chain is open and transparent without privacy, especially negative reputation involves a lot of sensitive information of users; solution: zk zero-knowledge proof, such as an SBT can prove that you participated in 14 rounds of Gitcoin donations, but will not disclose the specific donation amount , project, time and other information.
  4. How to incentivize data providers to access: Not all traditional web2 institutions are willing to go on the chain, which involves their core competition barriers + user privacy leakage

To sum up, SBT identity data is still likely to be stored in a mixed way of on-chain + off-chain .

Web3 Social Protocol Monopoly and Soul Binding Token

  • Will the Ethereum Foundation do SBT in person? What is the competitive landscape of SBT and existing identity protocols in the future?

On the off-chain identity track, identity standards such as W3C Verifiable Credential have been promoted for five years, with mature technical solutions and high institutional recognition. A number of identity solutions with excellent performance and cross-chain support have emerged on this standard, such as Unipass , Disco; In the identity track on the chain, different projects are also implemented from subdivision scenarios, and establish their own communities, such as Project Galaxy, Poap.

Although there are many new projects on the SBT track, such as Firstbatch and Marry3, the finale is far from conclusive.The Ethereum Foundation has not announced an official solution for the time being, and there is a high probability that it will take action, which is likely to become a hot spot in the market in the future. However, the foundation has always been slow, and many problems need to be solved before large-scale implementation, such as storage solutions, institutional cooperation, zk privacy issues…

Even if Ethereum will have its own SBT solution, many identity protocols are likely to be the same as the expansion solution (L2/subchain/Appchain coexistence). For different application scenarios and user needs, social applications can choose the most suitable one at the current stage. Identity Solutions.

Reference

https://jacob.energy/hyperstructures.html

https://www.placeholder.vc/blog/2019/10/6/protocols-as-minimally-extractive-coordinators

https://foresightnews.pro/article/h5Detail/7671

https://jacob.energy/hyperstructures.html

https://www.varunsrinivasan.com/2022/01/11/sufficient-decentralization-for-social-networks

https://www.panewslab.com/zh/articledetails/D99422028.html

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4105763

https://vitalik.ca/general/2022/06/12/nonfin.html

https://www.youtube.com/watch?v=TbyVyVNsyys

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/web3-social-protocol-monopoly-and-soul-binding-token/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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