Galaxy: Exploring the evolution cycle and development trend of DeSoc applications

Original title: Exploring the Evolution and Growth of DeSoc Apps

Original author: Gabe Parker, Galaxy Research

Original translation: Luffy, Foresight News

DeSoc, short for "decentralized social network," is a growing sector in the cryptocurrency industry that leverages blockchain technology to establish a new standard for sharing ideas and information digitally. These applications, like many in the wider cryptocurrency industry, are designed to promote the values of data ownership, transparency, and censorship resistance. The birth of blockchain-based social media platforms can be traced back to 2016, when the first blockchain-based DeSoc application, Steemit, was launched on the Steem blockchain.

Unlike traditional social media applications that typically require an email login, DeSoc applications use a blockchain wallet's private key signature for login. After logging into the DeSoc application using a blockchain wallet, users can share content, follow other users, and collect digital goods in the form of fungible and non-fungible tokens. Ownership of user data is controlled by the user's wallet and is typically stored in a distributed file storage system, which is different from using centralized data hosting services such as AWS and Google Cloud, which are used by large social media groups such as Facebook and Twitter. Certain DeSoc applications also provide data portability, giving users a unified experience across various applications without the trouble of creating a new profile. Crucially, the technical architecture of DeSoc applications ensures seamless connection between users' profile data and blockchain wallets.

This report analyzes the on-chain activity of the most popular DeSoc applications since 2021, including Farcaster, Friend.tech, DeSo, and others. The report also delves into the narratives and growth strategies that drive the adoption of DeSoc applications, especially the adoption of Farcaster, a relatively new DeSoc application that accounts for more than 30% of all DeSoc-related transaction activity in 2024.

Active Users

In 2016, the first DeSoc application, Steemit, was launched on its own blockchain (Steem). Since then, DeSoc applications have accumulated more than 8.7 million users and completed more than 82 million transactions on Ethereum, Optimism, Arbitrum, Polygon, BSC, and other Layer 1 blockchains. As of April 6, 2024, DeSoc has a total of approximately 550,000 monthly active users (Note: users here are defined as unique wallet addresses that have interacted with the smart contracts of the DeSoc application in the past month). For most crypto applications, it is not easy to distinguish between active and inactive users. The analysis in this report defines "active users" as users who have interacted with the application's smart contract at least once during the application's lifecycle.

The top DeSoc apps have around 0.15% of Twitter/X’s monthly active user base. It’s important to note that the two DeSoc apps with the most cumulative users were launched between 2020 and 2021, so they have been around longer than Friend.tech and Farcaster. DeSo, a Layer 1 blockchain launched in June 2021, has the most user registrations among DeSoc apps, with 3 million cumulative users. Cyber​​ Connect, a decentralized social graph supporting all EVM-compatible chains, launched in September 2021, has the second-highest cumulative DeSoc user registrations, with 1.5 million users interacting with the app since its inception.

The top five DeSoc apps account for 85% of total registrations. As of April 6, 2024, DeSo accounts for 32% of total DeSoc app registrations. Farcaster has seen a surge in users starting in late January 2024, and although it is a relatively new DeSoc platform, it already accounts for 3% of total DeSoc registrations.

DeSoc Apps Share of Total Registrations

Different DeSoc apps have different user experiences and focuses. Here are the most popular DeSoc apps by category:

· Traditional Social Media: The user experience includes public posting, commenting, liking, and private messaging.

· Social Finance: The user experience involves purchasing assets that either provide access to gated content (Friend.tech keys) or represent fractional ownership of social media content (post.tech).

· Collection: User experience focuses on the collection of digital assets (mainly NFTs).

· Other: User experience that does not fall into the three specified categories above.

Traditional social media DeSoc apps are the most common apps in the DeSoc field today, with their users accounting for 67% of total registered users. There are four representatives of this type of app, while the collection category representative is only the POAP DeSoc app. It is worth noting that the social finance field only appeared in August 2023, and they ranked third in user registrations. Although activity on social finance DeSoc apps such as Friend.tech has dropped sharply, their rapid success and competitiveness in challenging the old DeSoc are significant.

Distribution of Total Registrations by DeSoc Category

From September 1, 2023 to April 1, 2024, DeSoc’s cumulative user count increased by 2.9 million, largely due to the launch of Friend.tech, a social finance DeSoc app built on Base Rollup. Friend.tech added more than 800,000 users from August 10, 2023 to January 1, 2024, making a significant contribution to DeSoc’s total user count. Although Friend.tech’s success was short-lived, the app clearly triggered a resurgence in other DeSoc apps. After Friend.tech's user base began to stabilize in late October 2023, new users of other DeSoc platforms such as Cyber​​ Connect, Farcaster, POAP, and Lens showed a clear growth trend, as shown in the figure below:

Friend.tech's explosive growth in 2023 made DeSoc the focus of Web3's year. Friend.tech's user base grew 620 times in 3 months, and the app generated more than $27 million in revenue. The driving force behind this activity was the expectation of an airdrop of the Friend.tech token. However, as of April 6, 2024, there was still no sign of an airdrop from the Friend.tech team, and user activity has since declined. In October 2023, Friend.tech had an average of 22,700 daily active users that month, but by January 2024, this figure had dropped to 1,000.

Number of Transactions

Users on the DeSoc app typically need to sign transactions on the chain to post topics, comment on other users' posts, forward posts, and complete other operations. Therefore, transactions that interact with the DeSoc app's smart contracts reflect the usage of the app.

From November 2023 to January 2024, the DeSoc application saw stagnation in user transaction activity and the number of daily active users. DeSoc's daily transaction count did not begin to show encouraging signs of growth until February 1, 2024, when it increased 3x compared to the previous two weeks. The uptick in transaction activity is partly attributed to the resurgence of Farcaster users who wanted to claim airdrops from sub-communities.

Farcaster is a traditional social media DeSoc app based on Ethereum L2 Optimism, launched in September 2022. Channels are forums on Farcaster with designated topics. For example, the Bitcoin channel is where Farcaster users who are interested in Bitcoin can share and discuss ideas about Bitcoin. On January 28, 2023, Farcaster's fastest growing channel, Degen, announced an airdrop of their $DEGEN tokens to all channel participants. It is important to note that the creators of the Degen channel and the token $DEGEN are not affiliated with the Farcaster team.

Farcaster’s mid-February 2024 trading surge was also aided by the launch of Frames, a new feature that allows users to embed web-based applications in Farcaster posts. With Frames, users can create token minting launchpads, interactive games, and polls in Farcaster posts. Riding on Farcaster’s momentum, user trading activity on other DeSoc apps (Lens and X-Connect) has also seen a small recovery. As of April 6, 2024, Farcaster is seeing over 6 million unique daily transactions.

Using exclusive access to users and social media content to drive user growth strategies has yielded the highest initial returns for DeSoc apps. Friend.tech amassed 820,000 users in 2 months, while it took Instagram and Twitter 3 months and 2 years to reach similar levels, respectively. However, DeSoc apps have difficulty retaining users in the medium to long term, with or without financial incentives, as we will discuss in the next section, DeSoc Narrative Cycle.

DeSoc Narrative Cycle

Historically, surges in DeSoc activity tend to follow a power law, where one app represents the majority of activity across all DeSoc apps. These rise and fall cycles of DeSoc apps highlight the weak stickiness of DeSoc users and the tendency to jump to the next popular DeSoc app. The last three activity peaks from 2022 to 2024 are telling because they demonstrate that DeSoc activity is driven by cyclical narratives.

The first meaningful surge in DeSoc activity occurred in March 2023, driven primarily by Lens, a traditional social media DeSoc app on Polygon, and X-Connect, another traditional social media app on Binance Smart Chain. At the time, decentralized social media apps that mimicked Web2 social media apps dominated the DeSoc market. The second surge in DeSoc activity in September 2023 was attributed to Friend.tech, which introduced a new DeSoc category called “social finance.” As mentioned earlier, social finance involves buying access to gated content and buying partial ownership of user content.

The third surge in DeSoc activity in February 2024 was due to a resurgence in user interest in Farcaster. Farcaster’s recent rise represents a resurgence in the decentralized traditional social media movement, which last saw a resurgence in March 2023 with Lens and X-Connect.

If history repeats itself, Farcaster’s on-chain activity could decline after 3-4 months, just as other leading DeSoc apps have seen activity surge and then fade in the past. However, Farcaster stands out as having the potential to sustain its high level of user activity due to its modular architecture that encourages channel creators to innovate.

Similar to Lens and X-Connect, Farcaster enables third-party developers and social media creators to easily build and launch their own DeSoc apps. Existing users of Farcaster can connect to Farcaster-based DeSoc applications without having to create new accounts to try out the applications. Additionally, with the introduction of Frames, Farcaster channels and applications outside of the Farcaster ecosystem can increase flexibility in engaging with users by building their own tokens, voting, and interactive games. This programmability gives the user experience on Farcaster great potential to drive sustainable user growth and activity for DeSoc.

Conclusion

Signs of mass adoption of DeSoc have yet to emerge, but the industry's resurgence over the past 12 months cannot be ignored. In about four years, the DeSoc app has grown by 8.7 million registered users. Inevitably, as the global cryptocurrency holder base grows over the next decade, we expect the number of DeSoc users to grow as well. Like NFTs, gaming, and DeFi, DeSoc is a sub-sector of the crypto industry that has the potential to drive mainstream adoption of blockchain-based technologies and cryptocurrencies. Looking ahead, Farcaster stands out as a DeSoc app because of its focus on attracting users and developing a sustainable growth strategy through creator-led features and content generation.

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