(Adapted from a talk given at NFT NYC 2022).
My name is Nick Confrey and I’m one of the founders of Seam, building social spaces for web3 and NFT communities. Previously, I was a senior software engineer at Facebook, specifically on the New Product Experiences team, tasked with building the next big social platform. The reason why I’m here today is because I believe that web3 and NFTs are going to disrupt the existing social platforms and lead to better social media.
By the end of this article, you’ll have learned:
- what the coldstart problem is for social media platforms and how NFTs beats it
- How ads create zero sum competition between all of us
- How we’ll enter the age of the remixable internet with web3 tokenized economy, unlocking a new creative renaissance online
Let me first tell you about the most inspiring talk I heard when I was an attendee last year. Jimmy Wales from Wikipedia spoke about how this moment on the internet feels like it did at the founding of Wikipedia--lawless, chaotic, but ultimately building something from the expertise of everyone. At first, it seemed like a pipe-dream, that a page editable by ANYONE could outcompete Encyclopedia Britannica, which was then the dominant source of information. But as it turns out, as a small startup, Wikipedia was able to take a chance on the new technology of the time, web2 internet, and outcompete the incumbent by digging into the collective expertise of the community. New editions of the Encyclopedia couldn't be published fast enough to keep up. That's exactly what's about to happen with the web3 internet--by tapping into the collective expertise of the community, we can outcompete and out-innovate the social media incumbents. An engineer in Silicon valley will never know our local communities as closely as we all do.
This is the remixable internet. Allowing anyone to shape our social platforms and all collaboratively build on each other's creativity.
So how do we get there? Well, it comes down to business models and incentives--show me the incentive, I'll show you the outcome. Let’s start with the web2, and then move to web3.
The web2 business model is advertising. Services like social networks get enough users, and then show them ads to earn a couple pennies per user. An average app on the iOS app store earns 4cents per user, and targeted advertising can do better than that, with Instagram earning about $5 per user, and Facebook earning $30 per user. However, this sets up fundamentally what we call misaligned incentives: the platform wants to keep the users around so that they can look at ads, while the users just want to spend enough time to keep in touch with their friends. Advertising business models are why platforms collect more data about us.
The web2 advertising model also leads to Zero sum competition--not just between the large social media companies, but also between you and me. Maybe you've personally felt like someone stole your content or idea on social media before--In the web2 world, attention, and therefore attribution and earnings, were zero sum. Your YouTube video gets watched more, you earn more from ads. Your post blows up on Instagram, you get more notoriety and clout. Implicit in all of this is the aversion to being 'ripped off'--if someone 'steals' your content and then goes viral with it, that feels bad--and also means you have missed out on income. So, as a content creator and builder, you are incentivized to hold onto your source code, hold onto your unpublished drum beats, and hold onto your less-than-perfect memes. That's a lot of wasted potential.
Web2 advertising also fails for open source software and doesn’t adequately compensate builders. You put it out on github and people just use it without giving much in return. Max Howell says that after creating homebrew, which is one of the worlds leading ways to use open source software libraries, he wasn’t compensated in any meaningful way, except receiving some swag items.
In summary, the web2 biz model creates zero sum competition. It stifles creativity, misaligns incentives between the users and the platforms, and extracts value from their users.
The new web3 business model is the tokenized economy (marketplace). In this business model, the platform releases a token or NFT system to facilitate exchange on their platform, much like how games use digital gold for their economies. Whales, those who use the platform the most, chip in for on-demand content, while regular users get enough tokens by playing to have no financial barrier. There are caveats abound: it needs to not fail the Howie Test (the way that the federal government currently decides what counts as a security and therefore what's an illegal use of a token) and also special care must be taken to make sure not to overfinancialize the system, increasing microtransactions and incentivizing unwanted financial speculation at the detriment of good social interaction.
With this web3 business model, let’s learn how it will beat the coldstart problem. The coldstart problem is what has historically prevented new social networks from being built. It's the chicken and egg challenge of attracting users to a platform before there's any good content or your friends already there; it's like showing up to a party and no one is at yet--you'll likely just leave and then the party will never achieve critical mass.
But the tokenized economy defeats the coldstart problem: by having users invested in the success of the platform, much like employees of a co-op, they are the biggest brand evangelists. If your name is associated with hosting the party, you'll get your friends to show up. As the platform provides increasing benefit and the rising tide raises all boats, they'll be incentivized to tell others about the project. CAC for web3 is zero, and that's a pretty huge advantage over web2 incumbents.
More importantly, the tokenized economy aligns incentives between the platform and its users. Time spent becomes not the key metric, and instead its about having the users accomplish their goals. quality time over quantity of time.
Okay, so: in summary so far, the web3 business model of a tokenized economy--we've beaten the cold start problem, making it easier for web3 social startups to scale. We've avoided ads on social media in the future, and with that, there are many other positive repercussions. Less data capture, more individual autonomy, more privacy. But I'd like to draw your attention to the real win and biggest impact web3 will have on social media: the remixable internet.
For the bull market, we've been so focused on 'who owns' an NFT--but we've forgotten the other half, 'who CREATED' each NFT. Web3 and NFTs empowers a creative revolution that finally inspires collaboration instead of competition for creators.
In the web3 world, the attribution can be tracked and royalties split automatically in smart contracts. tea.xyz is an excellent example of a project that takes open source code, and then rewards builders when it is used. Suddenly I don't need to jealously guard my creations anymore, because if people remix them, then I also get some of the royalties. Web3 is Win Win Collaboration.
At Seam we're taking this even one step forward by storing open source code as NFTs, and applying the remixable internet to shaping the social platforms themselves. We can even lower the activation energy to building new stuff: instead of just the 0.5% of the world's population that is a software developer being allowed to make new stuff, we can have anyone with an internet connection rip and remix. Just like changing a color from red to blue can be the gateway into learning, and then earning, from your new stuff. Rather than having to learn an entire coding language before even knowing where to get started, we can just take the open source code that is stored on-chain and then remix it, with some portion of the attribution going back to the original creator. This is deconstructive software development: take something that works, and then add your creativity into it, rather than starting from scratch.
This is the real end goal of web3: yes, read-write-own, but with that ownership comes CREATION, wide, endless unlocking of barriers to a more inclusive, egalitarian creator economy class that really breaks down the barriers and empowers us all to shape the platforms to our world, rather than having the platforms shape our identities. Building off of each other collaboratively instead of competitively, empowering 1000 true fans to be enough to support our ideal lifestyle and empowering us all to take up the reigns of our own digital agency.
If you are excited as I am about the remixable internet, tokenized economies and deconstructive software development, and the future of web3 social, find me on twitter.