Web3 Missed a Chance to Replace Twitter

In this issue of the Bloomberg Crypto newsletter,  explores why web3 social media has so far failed to replace Twitter, unlike Threads.

Needled by Threads

Jack Dorsey has said that when it comes to Twitter, his biggest regret about what happened to his social-media creation was that it ever became a company. His preference was for the social-media platform to be a “protocol” — the decentralized ideal advocated by crypto purists, not owned by a state or corporate shareholders. Instead, it’s now controlled by Elon Musk. 

When Musk first launched his takeover bid for Twitter last year, some hoped that the “Doge Father” might adopt some of those decentralized precepts for the platform. (He didn’t.) Others saw the chaos that resulted after he took ownership as an opportunity to push for Twitter alternatives, including “web3” platforms based on blockchain technology. 

But the reality of decentralized social-media projects hasn’t lived up to the hype. And so, people have migrated to the shiny new app called Threads, owned by another big tech firm, Mark Zuckerberg’s Meta Platforms.

Web3 boosters pitched the vision of infinite flexibility: Take your fans and followers with you anywhere; monetize your work on every platform; own and control who gets your data; and be free from the censorship of states, corporations or capricious billionaire owners. With that, a slew of attempts emerged, including Lens Protocol and Hive. 

But the problem lies in that web3, for now, is more of an “architectural set of technologies” with very few users, said David Pakman, managing partner at crypto investment firm CoinFund. Similarly, the decentralized platform Mastodon — which doesn’t run on blockchain but is an open-source social network — has positioned itself as a Twitter alternative with only modest success. Mastodon has 1.9 million monthly active users after launching in 2016 and gathering pace last year. Threads, by contrast, reached 100 million signups in its first week.

Of course, it’s always difficult for newcomers to achieve network effect. In the case of Threads, it got a big jumpstart by piggybacking off existing users of Meta’s Instagram. And the clumsiness and complexity of some of the open-source platforms has also been a put-off. (Pick your own server, anyone?)

Meanwhile, the biggest crypto companies, which would have been well-positioned to introduce their millions of users to a web3 social-media platform, are in the middle of their own crises. When digital-asset exchange BINANCE  Musk’s bid for Twitter with $500 million, its CEO Changpeng Zhao said he hoped his crypto firm would bring Twitter into web3 and blockchain technology. That doesn’t appear to be his priority now, with regulators around the world scrutinizing the company as top executives 

Still, with Twitter and other legacy platforms crumbling, “I think web3 missed an opportunity — I don’t think it missed opportunity,” said Miko Matsumura, general partner at VC firm gumi Cryptos Capital. He envisions a world where cryptography would be used to authenticate humanhood, as the internet gets “completely cluttered” by fake users and bot-generated content.

Even Threads has it’s built on the same protocol as Mastodon and other decentralized social-media apps, meaning users who build followings there could eventually use the app to interact with other competing products. Whether that becomes a reality is yet to be seen, but it seems for now we have more than enough to handle with the web we all know, let alone web3.  

Charting it out

Counting it out

Hearing them out

What we’re reading (and writing)

• Struggling Bitcoin Miners Are Wary of Token’s Big ‘Halving’ Event
• Miami Mayor Doubles His Wealth, Buys Boat With Profit From His Side Gigs
• Hong Kong’s Crypto Grey Zones Lure Chinese Visitors (Financial Times)
• Gensler Asserts SEC Authority Over Crypto as Opponents Waver
• Tech Investors Bet on AI, Leave Crypto Behind
• Crypto Startup ARKHAM Has Apparently Been Doxxing Users for Months (CoinDesk)
• Some Bad Bored Apes Won’t Undermine the NFT Market: Aaron Brown (Bloomberg Opinion) 

We welcome all feedback at [email protected].

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— With assistance by Suvashree Ghosh and Muyao Shen