Crypto Social Networks
Description
Felix Fritsch:
"A multitude of blockchain-based projects explicitly seek to challenge social media behemoths with decentralized platforms that leave users more control and reward them financially for their interactions. Such Crypto Social Networks (CSNs) make a particularly good case for the study of the effects of blockchain on society as they allow observation both of the subsumption of social relations under the reign of capital and of the constitution of selfsustained digital communities in a new digital commons."
Discussion
See: the Political Economy of Crypto Social Networks
Cases
Felix Fritsch:
Three Emerging Crypto Social Networks: Minds, HyperSpace and Steem
"Minds is a social media platform under development since 2011 which adopted the concept of a tokenized advertisements, payments and rewards system during the blockchain boom in 2016. Minds focuses on accommodating content producers that feel censored or demonetized by mainstream Web 2.0 platforms in spirit of “a free and open Internet where privacy is ensured and people are fairly compensated for their efforts online” (Minds.com). All of the platform’s code is open source, and the company encourages its use by “people to launch their own social platform, (…) integrate token economies (…) and (…) federate between networks” (Ottman 2019). Minds seeks to obtain full decentralization with the recently launched Minds Nomads dApp as alternative access to their network." (https://www.researchgate.net/publication/347390602_The_Common_Factory_Governance_and_Incentive_Systems_of_Blockchain-based_Social_Networks)
HyperSpace, a dApp in beta mode since February 2019, brands itself as protocol layer of a ‘New Content Economy’ powered by an “attention economy model (...) designed to remove the middlemen involved in content creation, distribution, and curation while enabling all value-creating parties involved directly to benefit financially” (HyperSpace 2019). The platform organizes content in spaces equivalent to groups on Facebook. Most of its decentralization efforts focus on providing flexible governance tools to these spaces, thus supporting competitive differentiation and adaptation to community needs in terms of self-administration and rewards structures. (https://www.researchgate.net/publication/347390602_The_Common_Factory_Governance_and_Incentive_Systems_of_Blockchain-based_Social_Networks)
In difference to other CSNs, Steem (*2016) is an own blockchain specifically designed for social network applications. As a unified backend accessible through different, competing frontends it constitutes a technological antidote to the lock-in effects users face vis-a-vis data silos of big social media platforms, upon which much of their monopoly power rests. Steem allows to build frontends, applications and supporting infrastructure without permission and thus potentially unleashes creative forces beyond the scale of any dedicated start-up entity. The Steem company currently develops a Smart Media Tokens template that shall allow easy customization and integration of all kinds of digital community interaction with the Steem blockchain. (https://www.researchgate.net/publication/347390602_The_Common_Factory_Governance_and_Incentive_Systems_of_Blockchain-based_Social_Networks)
The three projects by and far share a critical stance towards existing Web 2.0 platforms regarding exploitation of free user labour, unbounded surveillance practices and increasing propensity to censorship. All of them (seek to) utilize cryptographic tokens as rewards for value-adding user activities, smart contracts as transparent governance tools granting users more autonomy, as well as decentralized data storage leaving users in control. They differ significantly regarding activities deemed valuable, use value of tokens and governance mechanisms conveyed to users. Given their early stage, not all dimensions scrutinized here are fully developed yet, and some crucial questions remain to be solved. Nevertheless, in the following I seek to provide an overview of implemented and envisaged structures that in combination result in significantly different platforms.
Incentivizing User Behaviour through Rewards Systems
The characteristics of rewards systems reflect different answers to the shared problem of defining, weighting and rewarding the different sources of value creation. Differences in source, use and exchange value of rewards furthermore allow to draw inferences about their conception of platform- community relations as well as about the role of external interests. Minds issues rewards to users daily according to their ‘contribution score’. As each form of interaction (active: going online, referring new users; passive: receiving upvotes, comments, subscribers, reposts, transactions) has a fixed token value assigned, the daily rewards pool is deemed to grow with the amount and activity of users. Rewards concentrate on content production, while curation of content through voting, commenting or sharing is not rewarded.
Steem’s rewards stem from a fixed daily pool of tokens, of which 75% reward actors producing or curating content, 10% pay off ‘witnesses’ that secure the blockchain, and 15% are issued as interest on invested financial capital. In addition, the amount of STEEM a user invests proportionally leverages influence in as well as earnings from curation. The share of the rewards pool dedicated to content is distributed relative to the amount of staked capital each content can attract votes from. 75% of thus attracted rewards go to the content creator, the rest is distributed between curators and commenters relative to their staked capital. While Steem’s curation system is deemed to function as a prediction market that rewards discovery of quality content, on average, curators earn four times as much if they vote for their own instead of for others’ content. Overall, the system incentivizes particularly large token holders to freeride and maximize their returns through self-voting, ring-voting and vote-selling strategies that disregard the purpose of curation and collectively lead to a tragedy of the commons in terms of decreasing traffic and quality of content, which also reflects in token prices.
HyperSpace reverses the order of events by issuing tokens to users daily, to be spent on upvoting others‘ content, after which they become sell-able by receivers. This model harnesses curating users’ affect in egalitarian fashion and grants them control over the quantity of support they give to individual posts or comments. Incentives align the interests of diverse actors to contribute to a community’s benefit: Content creators pay fees to spaces they publish in that is determined by space admin(s). Content producers receive 60% of tokens spent on upvoting, 20% are distributed to previous upvoters of that same content, and 20% to the space it is published in. 10% of all space income reward its admins, 90% reward its top contributors. This design, referred to as prediction market, incentivizes curators to discover quality content they deem relevant to others, space admins to keep spaces orderly and attractive to content producers, and content producers to contribute to selected spaces where they can reap ‘top contributor’ benefits.
The Value of Tokens
The promised constant cash flow to users in form of tokens requires demand from ‘outside’ the platform economy for tokenized services the platform offers, unless one expects users themselves to create that cash flow, which on collective level defeats the purpose of rewarding users for their contribution.
Minds is the most straightforward in this regard as the platform both has a fixed price it sells tokens for itself (0,15$) and clearly visible use value of a token, which equals 1000 guaranteed views for content and serves as currency for several other services. Content producers who bring user attention to the platform are rewarded with tokens, which they can use themselves to boost their visibility, or sell to other users or advertisers. As peer-to-peer currency, the Minds token is used to purchase access to premium content as well as to premium features offered by the Minds company. The resulting economy is tailored to the needs of influencers and quality content producers seeking publicity and monetization infrastructure much more than to the needs of content consumers.
Use and thus exchange value of Steem’s tokens are less straightforward. Staked tokens generate interest and potentially voting rewards, that is, they accumulate over time – but this does not make them useful. The real external use value of tokens seems to be giving capital direct influence on the distribution of attention within the Steem ecosystem, as its different frontends all give ‚trending’ or ‚hot’ content disproportionately prominent space. Advertisers or political campaigns can get their content attention through own or rented voting power without having to declare it an advertisement or sponsored content. At least theoretically, this use value is the source of external market demand for tokens beyond pure speculation. The lack of effective incentives promoting qualitative curation visà-vis vote-buying practices makes such advertising practices extraordinarily cheap: Advertisers can marginally outbid ‘authentic’ content producers for votes, whose bids are limited by financial merit these votes have, and can easily divest tokens after a campaign.
HyperSpace is most opaque about circulation dynamics and future demand for its token. Team members informally referred to space registration costs and spaces incentivizing top content producers with tokens as sources for market demand. Such merely temporary expenses seem unlikely to absorb all tokens issued to users on HyperSpace daily. While a plethora of possibilities exists to create external demand for tokens in the wider cryptospace, they all either target users, advertisers or investors. If we recognize that the CSNs under comparison seek to channel funds to the former, advertising likely remains the only continuous source of demand given that investment is not a productive process in itself.
Governance Beyond Tokens and Incentives
As blockchains translate contractual agreements into self-executing code, executing rules of conduct on the blockchain ceases to depend on actual willingness and capability of executives. This bears potential in particular for loose, non-hierarchical digital networks hitherto limited by a lack of trust and enforceability. Social media communities are thus prime cases for the application of decentralized governance tools located on a blockchain. Among the CSNs under scrutiny, which realms beyond content curation are governed by such tools, how much autonomy do these tools grant users over what, and how is power distributed therein?
Minds seeks to empower content producers with smart contracts that regulate access to premium channels as well as monetarization of their advertisement space. The scope of these tools is limited to granting autonomy over the details of peer-to-peer sales contracts, while collective decisionmaking as source for dynamic community governance is not supported. Power therein, that is over the details of negotiated contracts, is based on market forces, that is, on demand and supply for premium content on the one and advertising space on the other side.
As blockchain, Steem provides significantly more governance tools. The Steem protocol itself has ‘witnesses’ who secure the blockchain and compete for votes through placing incentives and assuring legitimacy. The Smart Media Token (SMT) template under development shall empower unskilled users to launch tokens and define their economic parameters. Steem Engine, a user-developed “sidechain platform for the Steem blockchain” (Steem Engine FAQ, 2019) already boasts smart contract usage, token issuance and a decentralized exchange. Its emergence constitutes a shining example of the benefits of open architecture on top of a secure monetary infrastructure. Governing power in Steem’s foundational protocol is located strictly in the voting power staked tokens grant. In the wider Steem ecosystem, however, coding skills and means of attracting attention are relevant resources that go beyond mere financial capital.
HyperSpace seeks to develop governance tools that facilitate the autonomous organization of community within and competition between spaces. Upon payment of a registration fee, space founders shall determine its political nature through autocratic, meritocratic or democratic attribution of decision-making rights. Its electorate, by sanctioning (economic and other) rules, rights and obligations as well as further tools, shall be able to develop unique governance configurations in competition with other spaces over attention and quality contributors. HyperSpace does not envision permission-less development of new tools by users, and thus retains control over its grand trajectory. The project’s early state, however, cautions against taking these plans and their full realization through smart contract architecture for granted."