The advent of blockchain technology makes it possible to decentralize many concepts. A popular option is to create alternatives to social media networks and reward users for their contribution and retention. Steemit is an example of how not to approach this business model, although it also offers valuable lessons for future endeavors.
When Steemit first appeared, many crypto enthusiasts saw merit in the platform. As a blockchain-based clone of Reddit, the system would allow anyone to contribute content and potentially earn rewards for doing so. Users would determine which posts they considered useful, and the rest would automatically fade into obscurity. Upvoting and downvoting content is a great way to manage third-party contributions.
However, Steemit went a step further by adding a price tag to each post. The prize was represented in $STEEM tokens, which were to be awarded to the creator of the post for their submission. Additionally, users who vote for or against the content would also be rewarded, as the system offered incentives for active participants at all levels.
STEEM tokens have also served as a governance tool for Steemit. Specifically, users could earn Steem Power by posting, voting, and sharing computing power with the network. The higher the power of Steem, the more upvotes or downvotes count, giving Steem Power owners significant influence over the ecosystem. It was an interesting idea but one of the many reasons for Steemit’s eventual collapse.
Linking the electronic user’s voting power and cryptographic holdings – in STEEM fatal error since the first day. More Steem power does not make one user better than another, nor should it influence the influence they have on the community at large.
Ultimately, the community split into two camps: one on the Hive blockchain – via a Steemit fork – and the other on the original platform.
The power struggle surrounding Steemit shows how difficult it is to create decentralized social media platforms where financial incentives play a crucial role. Introducing a new token is great, but combining economic value with governance isn’t necessarily the smart approach. Moreover, it confirms that the founders of such platforms should never be allowed to acquire such large sums of tokens before launching their product.
Web3 social networks: can they do better?
As Web3 is one of the hottest topics today – mainly because it empowers users – one has to wonder how future social networks will work. Decentralized, community-powered, ad-free, and self-monetization options for content contributors are just a few of the perks that can be unlocked. However, one cannot be a compromise for the other, and finding a balance between these different aspects is never easy.
Whenever users are rewarded for taking actions on social media (content sharing, upvoting, comments, etc.), there is also an incentive for bad behavior. Elimination of copied content or collusion is paramount but difficult to achieve or enforce. Allowing content creators to make money is a powerful concept, but the potential pitfalls should not be overlooked either.
Builders of Web3 social networks need to determine if a native token is even needed. Sure, it can serve as a reward, but turning it into a governance asset is a tricky business. Big stakeholders will try to influence communities and make the whole platform play by their rules, like what happened to Steemit.
The introduction of a DAO-style governance structure could alleviate some of these concerns. However, Web3 social networks require a threshold to introduce equal voting power for all, regardless of token holdings. It can be hard to overcome, but it’s not impossible.
Web3: Main challenges
There is huge potential when decentralizing social networks. Empowering users rather than companies and rewarding them for their attention are intriguing ideas. But unfortunately, services like Steemit confirm how difficult it can be to develop a long-term viable approach to decentralized social media.
Even with the growing attention to Web3, these crucial drawbacks aren’t going away. More emphasis on rewarding users is positive, but the infrastructure needs to create a level playing field. Individuals and entities will always try to game the system and bend it to their will. Avoiding this pitfall will be the main challenge for Web3 social networks.
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