Variant Fund Partner: Asset Priority or Ideology Priority in Web3 Social Network Construction

Prioritizing Assets or Ideology in Building Web3 Social Networks: A Variant Fund Perspective

Author: Li Jin, Partner at Variant Fund; Translation: Blockingxiaozou

I see two main approaches to building Web3 social networks: asset-first and idea-first.

The asset-first approach focuses on users’ desire for profits, unlocking potential opportunities through digital ownership and placing funds at the forefront of the platform. Financialized features allow users to consume, collect, and earn money within the network.

BitClout is a perfect example of an asset-first strategy, allowing users to bet on the trajectory of prominent projects by trading creator coins and creating a speculative social game at the center of the network. Lens is another asset-first Web3 social network, where users’ posts are instantiated as NFTs for collecting and purchasing, with top creators earning over $90,000 by selling post collections. The PFP NFT community can also be seen as an asset-first social network: building interest groups by collecting assets. In all these examples, users’ motivations for participating are not purely intrinsic, but involve potential economic benefits to some extent. It’s like collecting stamps or baseball cards: it’s fun and enjoyable, and who knows, maybe one day they will become valuable?

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In contrast, the idea-first approach to Web3 social construction requires attracting users’ values and ideas. This means emphasizing blockchain features, including censorship resistance, data privacy, and the portability of social graphs and creative content. The actual user experience may be very similar to web2 social products, but the underlying architecture involves storing some data on the chain, and all the benefits that come with it.

My view is that Web3 social networks will succeed by taking an asset-first approach, creating profit opportunities that attract users. In other words, these networks are not purely social networks, but socio-economic networks. This approach also creates a clearer differentiation in user experience, which theoretically should resonate more widely. (Making money is a universal need, while ideas may be quite abstract to many.) This also reflects the paths taken by other areas in the crypto world (including NFTs, DeFi, and even L1) for more widespread adoption: the desire for economic gain drives new networks and applications and plays a critical role in their adoption.

It is important to note that a bias towards asset prioritization does not mean catering to speculators to create an easily manipulable financial game. Social networks are vulnerable to spam and bad actors, resulting in negative network effects. This is different from DeFi lending protocols, where all liquidity is valuable, even if it comes from economically motivated users, whereas in social networks, the quality of content and users is important. Simply rewarding all content creation, propagation, or use is a blunt economic incentive that could lead to an environment rife with spam or useless content, or even a completely harmful environment.

A successful Web3 social network-based financial game should be a combination of intrinsic and extrinsic motivation. Stealcam is a content sharing platform where fans can earn a sales split after reselling the NFTs they own at a higher price. The platform attracts not only profit-driven traders who are keen on flipping images (like passing a hot potato), but also true fans who want to hold onto their favorite creators’ content as collectibles.

Adopting an asset-first approach will also support the construction of novel social graphs. Social networks are built around different social graphs, forming the basis of their network effects: Facebook started by leveraging your real-world friends/university graph; LinkedIn maps your professional relationships; and TikTok’s social graph is based on your interests, which are inferred from your behavior on the app. Asset-based social networks can pioneer and popularize ownership graphs, where users connect based on shared on-chain ownership. This is not just about aggregating users into PFP communities (the primitive version of this concept we’ve seen). As users’ ownership histories accumulate more and more on-chain, this ownership graph can richly reflect users’ interests over time, supplementing user-defined interests or real-world contacts.

In summary, there is a unique opportunity window for Web3 social network construction. Existing Web2 social companies like Twitter and TikTok are facing upheavals, and users crave something new.

Our vision for Web3 social networks is rooted in utilizing the unique capabilities of encryption technology to provide a differentiated user experience and support rewarding sustained usage.

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