The technical foundation, application pitfalls, and future evolution of decentralized social networking.

Author: Shaun, Yakihonne; Evan, Waterdrip Capital

The concept of decentralized social protocols (hereinafter referred to as Social Fi) is no longer fresh, but the products in this sector are continuously undergoing iterations.

At the beginning of the year, Kaito made “Attention” quantifiable and tradable for the first time, serving Web3 project operators after incentivizing C-end users; recently, the popular application FOMO in the European and American crypto circles has allowed users to intuitively observe the correlation between smart money's on-chain behavior and their social accounts through real transaction behaviors linked to on-chain addresses, thus triggering a strong resonance and producing the “FOMO” effect.

However, behind the continuous emergence of innovative gameplay at the application layer, the true determinants of the industry's upper limits are still the three dimensions of decentralized social protocols in the underlying product structure: identity systems, data storage, and search recommendation mechanisms. In this context, this article will analyze the product structure of Social Fi, dissect the technological evolution and structural traps of decentralized social protocols, and predict the future development trends of Social Fi.

Technological Maturity: Three Core Dimensions of Decentralized Social Protocols

Whether it is the centralized social networks of Web2 or the decentralized social protocols of Web3, their underlying structure is built around three dimensions, namely:

• Identity System (Account / ID)
• Data Storage
• Search & Recommendation Mechanism

These three dimensions determine the degree of decentralization of a protocol and also dictate its long-term evolutionary direction. The current industry has made significant breakthroughs in identity systems and data storage layers, but is still in the early stages regarding search and recommendation mechanisms, which is also a key variable determining the future explosion capacity of social protocols.

1. Identity System (Account / ID)

Different protocols adopt different technical paths in their identity systems:

• Nostr uses a cryptographic structure, local storage, and does not rely on any client or server, achieving a fully decentralized account system. Although the early experience was not user-friendly, it has been improved through methods such as username binding.
• Farcaster adopts on-chain DID (decentralized identity) and relies on specific hubs for data storage.
• The account system of Mastodon / ActivityPub relies on domain names and is bound to specific servers. Once the server goes down, the corresponding accounts will also become invalid.

From these designs, it can be seen that the account systems of different protocols exhibit varying degrees of decentralization in aspects such as “whether they are independent of the client/server” and “whether they support cross-client login.”

2. Data Storage

Web2 data storage completely relies on centralized servers, while decentralized social protocols typically use distributed nodes or Relay networks.

Farcaster achieves efficient storage through a limited number (about a hundred) of Data Hubs and distinguishes between on-chain and off-chain data.

Mastodon is attached to its own independent servers, and although it is open, it lacks cross-server data interoperability.

Nostr allows anyone to deploy a Relay, and data can be synchronized across Relays, even if some Relays are offline, the content can still be discovered.

Key analysis indicators include: data storage location, discoverability rate after node downtime, data tampering verification mechanisms, etc.

Currently, Nostr effectively alleviates the loading and redundancy issues of distributed storage through the online/offline model. YakiHonne is also the first client to launch an offline publishing model, allowing users to publish content and automatically synchronize even in weak network environments.

3. Search & Recommendation

Search and recommendation algorithms are the most difficult and also the most critical issues.

The early Nostr had a poor search experience because it was entirely based on a public key system; however, it has now been optimized through username mapping.

Bluesky (AT Protocol) uses a partially centralized algorithm for recommendations to improve the experience.

Nostr is currently attempting to build a decentralized search and recommendation mechanism from the Relay layer.

Therefore, the algorithm layer remains the biggest challenge for decentralized social networking at the current stage, but once resolved, it will mark the beginning of a large-scale explosion in the entire field.

Overall, the current decentralized social protocol has addressed about 2.5 issues across three core dimensions: the identity system is fully decentralized and becoming more user-friendly; the distributed storage mechanism has matured and effectively addresses loading and search experience; the recommendation algorithm is still in the exploratory stage, which is the key breakthrough for the next step; for example, Kaito's Yaps mechanism, which uses AI algorithms to quantify and reward users for posting high-quality crypto-related content on social platforms. It measures users' “attention” and influence in the crypto community, rather than just simple likes or exposure. From the perspective of technological evolution, this will be the critical point determining whether decentralized social networks can achieve large-scale adoption.

Traps Encountered in the Emergence of Social Fi Application Products

Since the concept of Social Fi was born, the industry has seen a plethora of products, including representative projects like Lens Protocol, Farcaster, and Friend Tech. However, the vast majority of applications inevitably fall into some structural traps during their development, making it difficult to maintain user engagement once their initial enthusiasm has waned. This also explains why many Social Fi projects often flourish for a short time but struggle to sustain long-term growth.

Function Reproduction Trap: Many Social Fi projects directly copy Web2 social modules, such as tweets, long articles, videos, communities, etc. This does not create sufficient motivation for migration, nor does it form differentiated content value.

The Trap of Lacking Niche Users: The success of early social protocols often depends on whether they have a group of strong niche users. Taking Nostr as an example: although it is a niche protocol, it has a strong cultural driving force from the Bitcoin community; the activity level of just the yaki client surpasses that of Farcaster's Warpcast. Therefore, Social Fi products that lack a cultural foundation or clear scenarios typically have a short lifecycle.

The Trap of Misusing Token Incentives: Many projects mistakenly believe that “token incentives” can replace product logic. For instance, some early viral Web3 social applications only had short-term effects—due to the lack of a specific user ecosystem and sustained scenarios, they quickly disappeared. Similarly, when projects stack DID, Passport, various Web2 functions, and then add token issuance and Payment modules, they seem “comprehensive,” but in reality, they fall into a complex and unsustainable trap. This is because any individual module is a very deep vertical application.

Application forms will continue to be reconstructed: We are currently in a transitional phase from “protocol maturity → application reconstruction.” The future forms of social applications cannot be an extension of Web2, but will generate entirely new interaction structures. Five years from now, the application layer forms will be completely different from now.

Once the core issues of the underlying protocol layer are thoroughly resolved, upper-layer applications will certainly emerge in a completely new form, rather than being a simple extension of the existing social model.

Resource and narrative-driven traps: social protocols, with their specific strategic/political positions within the industry; whether the constructed social protocols have specific power support is also very important. Although Nostr and Bluesky do not issue tokens, they are both backed by strong resources or factions. Resources and narratives are often a threshold that Social Fi finds difficult to overcome.

Possible Directions for the Future: The Next Evolution of Social Fi

Most social tokens cannot form long-term value, and the core reason is the lack of real trading logic and user retention motivation. Compared to traditional Social Fi incentive models, there are two more promising directions for the future:

1. Social Client as a Payment Gateway based on payment needs

Social clients inherently possess identity binding, relationship chains, and message flow structures, making them very suitable as entry points for scenarios such as cross-border payments, micro-settlements, and content monetization.

2. Social Clients as a DeFi Gateway based on Trading Needs

Social networks are inherently related to asset behavior. When social relationship chains are integrated with on-chain asset flows, it may form a new generation of “social-driven on-chain financial behavior entry points.” The outbreak of Fomo (the linkage between social behavior and trading behavior) is, in fact, an early manifestation of direction 2.