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

Written by: Shaun, Yakihonne; Evan, Waterdrip Capital

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

At the beginning of the year, Kaito made “attention” quantifiable and transferable for the first time, incentivizing C-end users to serve the operations of Web3 projects; recently, the popular application FOMO in the European and American crypto circle binds real trading behavior on-chain with social relationships, allowing users to intuitively observe the correlation between smart money's on-chain behavior and their social accounts, thereby triggering strong resonant emotions and creating a “FOMO” effect.

However, behind the continuous emergence of innovative gameplay at the application layer, the real factors that determine the upper limit of the industry 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, examine the technological evolution and structural pitfalls of decentralized social protocols; and predict the future development trends of Social Fi.

Technology 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

These three dimensions determine the level of decentralization of a protocol and also influence its long-term evolutionary direction. The industry has made significant breakthroughs in identity systems and data storage layers, but it is still in the early stages regarding search and recommendation mechanisms, which is a key variable that will determine the future explosive potential of social protocols.

1. Identity System (Account / ID)

Different protocols adopt different technical paths in identity systems:

Nostr adopts a cryptographic structure, local storage, and does not rely on any clients or servers, achieving a completely decentralized account system. Although the early experience was not user-friendly, it has now been improved through methods such as username binding.

Farcaster uses 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 account 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 client/server” and “whether they support cross-client login.”

2. Data Storage (Storage)

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

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

Mastodon is attached to independent servers, and although it is open, it lacks data interoperability across servers.

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 analytical 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 introduce the offline publishing model, allowing users to publish content and automatically sync 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 public key systems; however, it has now been optimized through username mapping.

Bluesky (AT Protocol) uses a partially decentralized 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 this stage, but once resolved, it will mark the entry of the entire field into a period of massive explosion.

Overall, the current decentralized social protocols have solved about 2.5 problems across three core dimensions: the identity system is fully decentralized and becoming more user-friendly; the distributed storage mechanism is mature and effectively addresses loading and search experiences; the recommendation algorithm is still in the exploratory stage and is the next key breakthrough point; for example, Kaito's Yaps mechanism uses AI algorithms to quantify and reward users for publishing high-quality crypto-related content on social platforms. It measures users' “attention” and influence in the crypto community, rather than merely likes or exposure. From the perspective of technological evolution, this will be a critical point in determining whether decentralized social networks can achieve widespread adoption.

The pitfalls encountered during the emergence of Social Fi application products.

Since the concept of Social Fi was born, a large number of products have emerged in the industry, including representative projects such as Lens Protocol, Farcaster, and Friend Tech. However, the vast majority of applications have inevitably fallen into some structural traps during their development process, and it is difficult to maintain user stickiness after a momentary surge of enthusiasm has been exhausted. This also explains why many Social Fi projects often appear briefly and cannot maintain long-term growth.

Functional replication trap: Many Social Fi projects directly copy Web2 social modules, such as short posts, long articles, videos, communities, etc. This does not provide sufficient motivation for migration and cannot create 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 of just one client, yaki, surpasses that of Farcaster's Warpcast. Therefore, Social Fi products that lack a cultural foundation or clear scenarios usually have a short lifecycle.

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

The application forms will continue to be reconstructed: we are currently in a transitional phase of “protocol maturation → application reconstruction.” The future social application forms cannot be an extension of Web2, but will generate entirely new interaction structures. In five years, 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 existing social models.

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

Possible future direction: The next evolution of Social Fi

Most social tokens are unable to form long-term value, primarily due to the lack of real trading logic and user retention motivation. Compared to traditional Social Fi incentive models, there are two directions with greater potential in 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, small-value settlements, and content monetization.

2. Social Client 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 create 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 actually an early manifestation of direction 2.