May 05, 2022 - 10 min read
The economics of the Internet as we know it has changed dramatically in the previous decades. In the early days, simply purchasing the hardware and software necessary to get online made up most of the economic activity one could expect. Starting in the 2000s, the web became more interactive, giving creators and users a more interactive experience than previously existed. Nevertheless, it took years for payments to transition from being done manually over a phone to the apps which take our credit card information, which took on additional risk when stored in their databases.
Subsequently, we witnessed the rise of payments apps like Paypal and Cash App, and have been relying on specific platforms for which all parties involved in a transaction must be registered with to transact with each other. That is to say, that for two individuals to make P2P transactions, applications like Paypal need both users to register for accounts, and be granted permission from the application itself. Social media sites like Twitter, Facebook, YouTube, and others have similar arrangements regarding the exclusivity of their networks.
As the creation and sharing of social media grew, creators began looking for better ways to monetize their content. Firms like Patreon, GoFundMe, OnlyFans, Substack, and a slew of others rose to meet the demand of creators and their communities. Followers were given the chance to directly pay their favorite creators, and have their payments recognized and rewarded by the receivers. Subscription and other tier-based participation schemes were developed to help creators scale and diversify their monetization strategies.
Of course, these were companies incentivized to grow their user bases so they could serve as many customers and transactions as possible. Users have been encouraged to like, subscribe, and share social media posts. However, content visibility and monetization has also largely been determined by algorithms, and more recently, by direct intervention via content curation or outright censorship, which is often fickle and lacks transparency.
If staff are able to manipulate how monetization occurs on their networks, they could determine that specific content shouldn’t be seen or promoted based on their own arbitrary reasons or moral reasoning, right or wrong. However, over time this has proven troublesome — as reports of unfair treatment on these platforms, whether via algorithm or manual interference, have been growing more common.
While at first glance this might seem like a trivial thing, let us not forget that Aristotle was condemned to death by his peers in Athens over impiety towards religious and social institutions of his time. Though some have argued that such a fate was acceptable as an expression of Athenian democracy, the consensus view of modern historians is to see the folly in stifling or punishing the thoughts and speech of others rather than overcoming them withbetter ideas.
It has been a common trend to witness various online platforms achieve incredible success, only to end up in competition with many of their users, even removing or otherwise dismantling many of the core features that made the platforms attractive in the first place. As platforms become saturated with content creators, sustainable monetization dries up and becomes almost exclusively reserved for a select few elite creators. Unfortunately, this removes what initially seemed to be a level playing field for creators participating on the platform and collectively sharing the financial benefits via monetization.
Across social media, payments applications, publishers, and even fundraising platforms, evidence of users being denied access to these apps and services from unjust discrimination has piled up, such as being born in the wrong country or holding dissident political or cultural views. This amount of power over public discourse is clearly inappropriate to be permitted by board members or donors of these companies, which may have motives misaligned with virtues of liberalism and equality.
Discrimination, censorship, and other inappropriate gatekeeping behavior has been widely criticized in the public and especially political spheres, but somewhat less attention has been given to how these issues have affected creative expression and healthy relationships between individuals online. Discourse on social media is often regarded as cold and disconnected compared with interactions in the physical world, but it has always been taken for granted that this results from the anonymity of being online, which reduces inhibitions preventing bad manners or worse from infecting the platforms.
Perhaps there is more to the story than simply anonymity and a dearth of witnesses during online conflicts. Perhaps it is more about a lack of accountability that stems from placing all of our trust in central entities to clean up content and protect us from harm. In the physical world, we expect our surroundings to be more or less safe from harm, but by the same token we expect this safety comes less from heavy policing or curating of peoples’ behaviors.
Instead, civility is derived from having clear and enforceable measures of accountability in the event of social or legal breaches of common courtesy. The same scenarios can be replicated on the Internet without brutal censorship or centralization of curatorial authority. The Internet needs a decentralized layer of money which simply disincentivizes bad behavior and rewards positive contributions.
Regardless of the way social media companies market themselves, it is difficult to describe their platforms and core attraction as anything other than user-generated content (UGC). Though social media platforms handle much of the marketing and operations, they also monopolize the policy-making with regards to who and how much their users share in the ad revenues generated from traffic on the website.
So if the currency of the previous generation of social media was a mixture of likes, follows, subscribes, and pageviews, it points towards a distorted economic model full of potholes in which to fall into. After all, should content creators put themselves in a position where their livelihood depends upon impressing an algorithm or otherwise faceless, opaque department within these companies with a growing base of the social currency mentioned above? It is difficult to argue that these incentives have produced optimal results regarding genuine ideological inclusivity and healthy discourse online.
Perhaps a paradigm shift is needed in order for incentives to align which produce a healthy environment in which to interact online. Genuine experiences, and a renewed focus on quality and accountability needs to be adopted and perpetuated in order to escape the race for clicks, trolling, and other behaviors which are intended to stir up the pot. It follows logically that in addition to UGC, we will also see the proliferation of user-generated capital.
Fast forward once again to the birth of blockchain technology and the solution to this issue materialized, though we have yet to fully realize it. No longer do creators need to rely on central platforms to distribute their content and monetize it. The base layer of blockchain technology lays the foundation upon which smart contracts and DeFi protocols have emerged, enabling creators to monetize their own content, financially interacting with their fans and followers more directly, beneath the reach of social media protocols built atop the monetary layer.
Two concepts in particular emerge from the synergy of composable Web3 technology: direct monetization, and therefore accountability, in the form of digital currency, and the decentralized formation of bespoke networks with ongoing, dynamic relationships via NFTs. That is, creators and their communities will interact online with far less friction and far more flexibility than ever before.
First of all, digital currency in the world of Web3 adds a monetary layer of accountability to underpin the internet and our interactions on it. This will change everything about social media, from the way content creators raise funding from their supporters, to how we take part in and display the communities we engage with, to the way we hold liars and spammers accountable for malicious acts. Since fundraising has already been discussed above, and community engagement will be covered in more depth as it relates to NFTs below, let us briefly take a closer look at accountability via digital assets.
Illustrating the importance that accountability will play once decentralization comes to social media in the form of digital money is simple enough. First, since creators can receive funding directly from their supporters or other positive interactions online, they can sidestep any opaque manipulation by algorithms or other behind-the-scenes manipulation which might redirect funding away from the creator and towards a platform, or a platform’s preferred creator class.
This works wonders in both the affirmative and negative: affirmative in that creators can receive exactly the funding which was intended for themselves directly, and negative in that bad-faith actions, outrage episodes, and other forms of dishonesty or disingenuousness will not be rewarded in the way that it is currently. That is, simply making outrageous content or attempts to rage-bait could be disincentivized by more precise and democratic rewards distribution mechanisms.
The second example relates to how spammers can be held accountable as well by Web3’s economic model, potentially cleaning up the digital space of a pest which has lingered for far too long. Web3 social media can simply require a minimum deposit of a given crypto asset in order to interact with their platforms, with the collateral automatically returned to the user at will. The only catch is that spamming or botting behaviors will immediately result in lost collateral. How long will it be before it becomes too expensive to engage in such behavior? The incentives will be reorganized in such a way that makes such behavior uneconomical.
NFTs, of course, have been around for several years, with their reputation first manifesting as some sort of digital art or collectible. Of course, CryptoKitties, CryptoPunks, Axie Infinity, NBA Top Shot, and many more have demonstrated the power of NFTs as a form of social currency. Take the Bored Ape Yacht Club, for instance, an Ethereum-based NFT collection owned by many of Hollywood’s rich and famous, not to mention sports stars and crypto heavy-hitters around the world.
Being in the exclusive club of Bored Ape NFT holders is rather expensive at this point, proving just how desirable the right social currency can be. BAYC has even hosted physical events which are reserved for Bored Ape NFT holders, and released exclusive content and accessory NFTs to their community members. It could be argued then, that NFTs become user-generated capital by virtue of the verifiability and non-fungibility of the NFTs which users mint on blockchains.
Other relevant examples of user-generated capital come in NFT form includes individual Axie NFTs from GameFi’s Axie Infinity, as well as NBA Top Shot’s Moments. Axies are creatures which are bred (minted as NFTs), collected, and trained by players, and they can even sell their Axies for a profit to other players. Since the Axies are dynamic, their value can be increased by other means aside from their original rarity rating, not to mention integrated into an expanding universe of blockchain gaming.
This paradigm shift in content monetization and layer of accountability inherent to Web3 is transforming value creation and distribution on the Internet before our very eyes. Soon, we will still remember the pageviews, likes, and subscribes of yesteryear, and the sloppiness with which funds were distributed by the limitations of previous iterations of the web. With Web3 user-generated capital will fundamentally reshape consumer behavior, and shape human behavior online in a moral direction characterized by integrity, credibility, and civility.
In particular, the new dynamics of user-generated capital via Web3 protocols empower all of their users to become co-owners by giving them a stake in the protocol via crypto assets, like tokens. This participatory aspect of community building in Web3 cannot be understated. The online world is desperate for meaningful connections, genuine conversations, and a sense of belonging to something greater than themselves.
To facilitate these desires in constructive ways results in spiraling positive feedback loops. That is, that the excitement of users becomes contagious and spreads like wildfires. Strong online community ties will inspire and reinforce moral behavior where it is greatly needed. Let us decentralize social media in order for Web3 to bring us back together again.
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