The potential of blockchain to power the future of decentralized social media

At Coinbase, we’re working hard to help update the financial system by building trusted products that expand the utility and adoption of crypto because we believe crypto and blockchain technology can increase economic freedom and opportunity around the world. Coinbase chose to become a public company in the US because we believe the US would best be served by embracing this fundamental innovation, but we’re also focused on international markets, many of which are moving forward with strategies to become “crypto hubs.” We would like to see the US take a similar approach, but a regulation-by-enforcement approach in the US is instead leading to a disappointing trend for crypto development in the US. One of the many innovations that holds enormous promise in the US is decentralized social media, or “DeSoc.”   

Traditional web2 social media sites have transformed communication by connecting people around the globe. Over half of the world’s population uses social media, and the most popular sites generate billions of dollars in revenue. But these sites also bring traditional “web2” problems: big tech companies ultimately own the content that users create, and content moderation teams can deplatform users, erasing years of content and cutting off creators from their fans in an instant. Companies also profit from tracking and selling user data, and closed systems hinder innovation by third party developers. 

DeSoc networks have the potential to solve these problems using blockchain technology and other web3 features like tokens, pseudonymity, and decentralized governance. In short, DeSoc aims to guarantee that users “own a direct relationship with their audience” and with each other. Users can create accounts without providing personal information such as name or email address. They can join specific platforms that align with their interests, but still communicate freely with users across many different sites using their decentralized accounts. Users determine their own content moderation policies. And users who want to leave a site can easily migrate their account data, including their handle, posts, and follower list, to a different site. 

Specifically, DeSoc apps provide numerous benefits that can protect privacy, empower creators, and spur innovation, including:       

• Freedom of Expression and Privacy. Many DeSoc networks let users post pseudonymously, using an identity that cannot be connected to their real-world name. Users are also less likely to be subject to content removal and deplatforming, as there is no central entity to exercise such control. And because records on the blockchain are immutable, DeSoc networks provide built-in tools for users who want to authenticate their real-world identity over time and across multiple platforms.

• Ownership and Monetization. Rather than relying on ads or data tracking, many DeSoc apps issue native tokens to raise funds. They then reward users for their engagement, by distributing additional tokens for posting or participating in conversations. 

• Innovation. Most dapps are built using open-source code, which means that developers can access, modify, and build on top of existing code without restriction. This encourages collaboration and accelerates innovation. 

Meta’s recent launch of its own microblogging app, Threads, attempts to capitalize on at least some of these benefits. While Threads looks and feels much like traditional social media sites, Meta has said it will be compatible with ActivityPub, a decentralized social networking protocol that allows accounts to be hosted on independent servers. This decentralized structure gives users more control over their own data and allows them to easily interact with other networks on the same protocol.

DeSoc networks face specific challenges related to ease of use and content moderation. For example, their distributed nature can make it difficult for users to find particular friends and content. With an abundance of site names, search and navigation can be overwhelming. And at times, the site-by-site moderation approach can lead to de facto content moderation across an entire network. For these reasons, it is key that policymakers understand DeSoc networks and the regulatory areas they implicate. Specifically, DeSoc apps raise concerns about the potential spread of misinformation and propaganda, and the liability, if any, of decentralized protocols for illegal or harassing speech. They also lack regulatory clarity around the application of data protection and consumer disclosure requirements, and the tax implications of token transactions. 

Like all decentralized apps built on the blockchain, DeSoc apps have the power to increase freedom and opportunity around the world by giving creators more ownership and control over their content and networks. Blockchain is a breakthrough technology that lets people directly share information peer to peer, and has ushered in multiple use cases that benefit from blockchain’s efficiency, transparency, and accessibility. In an onchain world, transparency and trust are built into decentralized protocols themselves, and these protections will only grow as the technology develops. Therefore, lawmakers and regulators concerned about social media should focus their efforts on centralized actors, where additional transparency and disclosure are needed.

For more on the potential of social networking onchain, take a look at the Coinbase Institute’s new primer on Decentralized Social Media. Coinbase is committed to building the most trusted products, services, and tools, and we look forward to further exploring this topic with policymakers.