Blockchain and social networks: unbundling, and re-creating the stack

Given Facebook’s recent issues in the context of Cambridge Analytica and the resulting #DeleteFacebook, blockchain was quoted as a possible solution to Facebook and social networks in general.

There are several ways how Blockchain-companies are building a new „Facebook“. However, before looking at their strategies it is important to define „conceptually“ what Facebook. There are three aspects I find worth mentioning:

  1. A suite of products
  2. A person’s online identity
  3. A socio-technical system

A suit of products

That’s the most obvious aspect; its a product one can use. Besides the core product — the news feed — there is also the messenger or the marketplace. This includes haptic things like the UX and the content but also the less haptic things like the already developed network of users.

A person’s online identity

For a lot of people, Facebook represents their online “self”. On the one side, it is one’s online life: friends, relationships, interest and similar. Crucial about that is that — as I have mentioned in Bitcoin, Blockchain, and Cryptoassets: discussing bubbles vs. discussing socio-technical systems — that one cannot migrate that information (friends, relationships, interest and similar) to other services. In contrast to a phone number — which can be ported between providers — Facebook’s data (and the data of all other social networks) is attached to that very application.

On the other side — similar to a passport — it is a tool that grants you access to other sites through your Facebook log-in. Crucial about that is that although it has almost become a „universal good“, it is controlled by a non-neutral instance. This is in sharp contrast to the before-mentioned passport issued by a government — a neutral instance.

Socio-technical system

A socio-technical system consists of the technology per se, the applications and everything around it such as user practices, symbolic meaning, regulations and the wider network of stakeholders. The technology and applications refer to what I have described under “A suite of products” (the news feed, the messenger, the marketplace, the UX, the content, the network of users). In addition to that, there are countless other parties involved with Facebook such as marketing agencies specializing in Facebook or businesses that are built around or on Facebook (think vbloggers). Furthermore, people have accumulated a lot of knowledge regarding the right use of Facebook. This consists of marketing-related insight like knowing which type of content works but also numerous legal cases showing what people and Facebook are allowed to do. In this context, consider also all the money that has flown into Facebook either directly through stocks or indirectly by buying ads. Finally, there is Facebook embedding into society; asking for one’s Facebook instead of a phone number or checking Facebook instead of taking a „smoke break“.

These distinctions lead to three „moats“ Facebook has created:

  1. A suit of working products: To compete against Facebook one must first build better products. Maybe the easiest part, but still difficult and necessary to overcome.
  2. Network effects: To establish a new social network one must convince a multitude of people and companies to switch and to contribute content. Although new networks pop up from time to time, kickstarting a network as big as Facebook’s takes time (and money).
  3. Socio-technical system: As described-above, Facebook is deeply entrenched in society. It will take time to re-create that. Also, that socio-technical system is something that „happens“ with influence from all kinds of stakeholders of whom Facebook might not even have the biggest influence.

Now, with these moats and distinctions in mind, it is interesting to look at the ways blockchain companies are trying to fight incumbent social networks:

  1. Applications
  2. Social network protocols and platforms
  3. Blockchain-based advertising platforms

Applications

Those are projects that are building social networks on the Blockchain. Examples include Sociall or Sphere. Moreover, there is the LinkedIn/Xing-pendant professional social network Indorse . In addition to that, there are projects that only tackle one part of Facebook’s offering such as messengers or marketplaces. Obsidian is one example of a messenger built using Blockchain technology and Monetha is an example of a marketplace built using Blockchain tech.

Social network protocols and platforms

Under this category fall projects that do not create the end-user application but are developing protocols that enable others to build those end-user applications. The Mercury Protocol is one such example. The Mercury Protocol is an open-source protocol which other social networks (and similar platforms) can incorporate to leverage Mercury’s features such as pseudonymity, incentivization through tokens, and increased security through decentralization (to be fair those are features that apply to Blockchain in general). Furthermore, there are reward systems such as Synereo or Steem. Steem is a Blockchain-based rewards platform that consists of the Steem platform, the STEEM token, Steem Dollars and SMT (Smart Media Tokens). SMT is an umbrella term for tokens that can be launched using the Steem platform. Those SMT can then be used to create social networks where those tokens are rewarded through upvotes or likes incentivizing „good content“. Steemit is the first application launched on Steem and uses the STEEM token. Synereo is also a rewards system but platform agnostic and its token — AMP — can be used to reward creators and content sharers regardless of where the content was published. WildSpark is the first product built using Synereo. Whenever something is shared through WildSpark the recipient can reward the person who created the content and the person sharing the content with AMPs.

Blockchain-based advertising platforms

Projects like the Basic Attention Token that fall in that category are creating decentralized advertising platforms where middlemen like Facebook are cut out and profits — in form of the platform’s token BAT — are distributed between publishers, advertisers, and users.

Identity management solutions

Those projects take only one part of Facebook’s ecosystem — the online identity — and build online identities leveraging Blockchain technology. Examples include Civic or TheKEY.

Now, when we take a consolidated look at those Blockchain-projects, we can generalize a few strategies how they are attacking incumbent social networks:

  1. Utilizing a blockchain’s inherent advantages (distributed, incentivized) to build better social networks
  2. ​Unbundling Facebook
  3. Recreating the “Facebook-stack“

Utilizing a blockchain’s inherent advantages (distributed, incentivized) to build better social networks

The above-mentioned Sociall and Sphere are building decentralized social networks without a central entity and are compensating users for contributions. I doubt that rewarding people for contributing and decentralization itself will be enough given the switching costs inherent to leaving Facebook, Facebook’s above-described wide array of applications and the embedding in society. However, there are two interesting entry points that can be leveraged; niches and changes in Facebook’s environment. Considering that protocols like The Mercury Protocol or platforms like Steem allow anybody to „easily“ build another social network, many projects could create very niche applications attacking Facebook from multiple sites. Changes in Facebook’s environment is built on the rise and fall of other socio-technical systems in the past. The horse-based transportation is one example. Such and other socio-technical systems teach us that

  • these systems can be dismantled but
  • that for that to happen an external trigger is required

In the case of the horse-drawn transportation, one of many triggers was people moving to suburbs due to dirt caused by horses and thus having wider travel distances. The first cars were a solution to those longer distances.

Now, with #DeleteFacebook we can see an analogous trigger in the prevalent ecosystem of social networks. Whereas I doubt that it will be enough to bring Facebook down, I do think that if we want to get a „tokenized Facebook“ one way would be to „wait“ for some significant external triggers in Facebook’s socio-technical system.

​Unbundling Facebook

Similar to an unbundling (and re-unbundling) we can observe in the FinTech space we can see how the above-mentioned products are unbundling different Facebook products into stand-alone applications. Obsidian is an example of unbundling Facebook’s messenger, Monetha for unbundling Facebook’s marketplace, and — to some extend — Sociall and Sphere are unbundling Facebook’s core, the news feed.

Recreating the “Facebook-stack“

If we were to dismantle Facebook from a technical perspective we could argue that there are four stacks:

  1. Layer 1 or 0 — Internet protocols: The Internet’s protocols enabling Facebook to send data across the world
  2. Layer 2 — databases: Facebook’s databases storing the data
  3. Layer 3 — applications: Facebook’s end-user applications such as the messenger, the news feed or marketplace we use directly.
  4. Layer 4 — Identity layer: Whereas Facebook’s utility as an online identity can be seen as part of the application layer, it is useful to view it as a separate entity because we don’t use it as directly as, for instance, the messenger but rather „utilize“ it to use something else (i.e. a product where we use our Facebook account to log-in).

Having outlined the stack we come back to what many call the Web 3.0. In this Web 3.0, the current Internet is dismantled into a decentralized version. In this case, the stack could look as follows:

  1. Layer 1 or 0: Blockchains or protocols (e.g. the Mercury protocol) would represent Layer 1 or 0
  2. Layer 2 — databases: Decentralized databases such as Storj or MaidSafeCoin would be used to store data. One major difference to Facebook’s approach is that each developer could access that database.
  3. Layer 3 — applications: There would be either stand-alone end-user applications (e.g Obsidian or Monetha) or all-encompassing social networks. Because everybody can access the database storing all the friends, relationships, interest and similar one person has, a lot of companies can work on new applications without having to recreate the whole network of people.
  4. Layer 4 — Identity layer: Civic and other Identity management platforms would serve as an identity layer decoupled from Facebook.
Comparing Facebook to a possible Blockchain-based social network

With this „stack-approach“ it becomes evident how partnerships (technical — think cross-chain solutions as well as business-wise) could play an extremely important (but also very exciting) role in the future of Blockchain-based projects. Moreover, it shows how the best way to „beat“ incumbent isn’t necessarily to „attack“ them directly but to build a new Facebook or any other social network (or, for that matter, any other currently dominating web application) by combining several (Blockchain) projects horizontally (i.e. across the stack).


Originally published at researchly.leobosankic.com on April 12, 2018.