Facebook’s Blockchain Affair | Can Blockchain Win? — Social Media Platforms 2.0 [Part 3]

Social media networks based on token economies are the future. They reward the real value creators – their users. Can Facebook modify its exploitative philosophy and adapt to this new trend?

Photo by Ivan Bandura

It is safe to say that 2018 was one of the worst years for Facebook so far. AdWeek actually called it:

“Facebook’s Terrible, Horrible, No Good, Very Bad Year”

The tech giant was involved in a number of high-profile scandals ranging from accusations of enabling meddling with the 2016 US presidential election and allowing companies like Cambridge Analytica to obtain the data of tens of millions of Facebook users, to data breaches and privacy related bugs affecting millions of Facebook users.

In December the #DeleteFacebook movement was re-initiated after documents from a company called Six4Three were seized by a US judge and obtained by British lawmakers. The chain of Facebook-related scandals in 2018 made one point very clear:

Facebook’s business model is based almost entirely on the accumulation and unrestricted large-scale sale of personal data.

But a policy for better privacy online is perhaps not in Facebook’s best interest, despite what Mark Zuckerberg claimed recently. In the words of David Wehner, Facebook’s CFO:

2019 does not look too bright for Facebook indeed. The company could face a record fine by the US Federal Trade Commission that is rumored to exceed $1 billion.

It remains to be seen if the tech behemoth will be able to adapt successfully to the new privacy movement that is gathering momentum globally. On the other hand, is it possible that Facebook does not need to adapt? Has the most popular social network already joined the ranks of financial giants like AIG, Citigroup and JPMorgan Chase already considered “too big to fail”?

Just as high concentrations of toxic debt are now considered unhealthy, thousands of petabytes of personal information being managed by a single company must be seen as a systemic risk.

More and more people realize that. In a recent article for Bloomberg, Leonid Bershidsky called for a much needed Facebook reform:

The actual owners and real-time producers of data – we the people – should have a say in how much our information is worth [and who can access it].

This is certainly a possible solution – re-imagining the Facebook business model allowing for the enormous profits that the company makes to be shared with its users and content creators.

The other approach is to simply move away from Facebook and join more transparent, privacy-oriented and rewarding social networks. Those based on blockchain technology are definitely worth considering.

In the following series of blog posts, we look at possible approaches to creating a new kind of social media network that incorporates unique features, enabled by permissionless blockchain technology. We have already considered self-sovereign identity and encrypted chat, by default, as fundamental components of next-generation social platforms.

In the current part of the series, we will dive into another unique feature of blockchain-powered social media:

  • Incorporated cryptocurrency/token payments

Enabling peer-to-peer payments in various cryptocurrencies/tokens in a social media platform can fundamentally improve the interaction dynamics between users and businesses.

A wide array of actions which currently cost nothing (and thus mean nearly nothing) could receive a “price-tag”, creating a decentralized economy that is based on more sincere interactions, as well as value creation and distribution on a global scale.

Let’s jump in!

Cryptocurrencies Enter Social Media

Incorporating cryptocurrencies into social media has been a topic of discussion for years. For many, it just sounds like the logical thing to do. It is important to note that the introduction of cryptocurrency in social media could happen in several different ways. Here are some of the possibilities:

  1. A popular social network incorporates a cryptocurrency / several cryptocurrencies for in-chat payments between users.
  2. A popular social network incorporates a cryptocurrency / several cryptocurrencies, replacing “likes” and “emotions” with micro cryptocurrency payments.
  3. A popular social network incorporates a cryptocurrency / several cryptocurrencies for all of the above and for rewarding content creators.
  4. A new social media network incorporates all of the above and users start migrating to it.

Facebook has actually been rolling out payments in its non-encrypted Messenger app for some years, allegedly allowing users to send and receive money for free.

Awesome!* [*Terms apply] Image

The feature was announced four years ago. Who can use it currently and under what conditions? The answer is provided on one of Facebook’s official help pages:

It turns out that four years later, only nationals of 3 out of 195 countries – the United States, France and the United Kingdom – can make payments on Facebook. Transfers can also only happen in USD, GBP and EUR. Furthermore, users are not allowed to make international payments even if the transfer is directed towards one of the other two supported jurisdictions.

The slow pace with which payments-related innovation has been introduced by Facebook is staggering.

The above doesn’t bare well for the introduction of cryptocurrency payments in the most popular social network. Facebook, however, surprised many by recently announcing that it is actively considering the incorporation of blockchain technology into its network. In February 2019, Facebook confirmed that it is looking into blockchains as a solution to:

The big question here is how decentralized will both of those really be? Here are some additional questions and considerations to bear in mind:

  • Distributed identity, managed on private infrastructure makes very little sense. If the user does not have complete control over their data or allegedly has full control, but must instruct a third party on how to use this data -> no innovation has been introduced.
  • A distributed identity that enables full control by users will change Facebook’s business model, making it harder for the company to harvest and sell user data. Is Facebook trying to burn its own house? Very unlikely.
  • It is unclear why tokens issued by Facebook, traded on selected exchanges and linked to a fiat currency (stable-coin) are a better alternative to fiat itself.
  • How long will it take for 2.5 billion users to start using Facebook’s stable-coin? In essence a cryptocurrency is a global currency. If the users of only a few selected countries can access it, why not use USD (or other fiat currencies) instead?
  • How much more sensitive personal information (KYC/AML) will Facebook require in order to enable cryptocurrency payments between its users, regardless of their home jurisdiction?

It remains to be seen what answers Facebook will provide to the above questions. The company has announced that its own token will be introduced in the first half of 2019, so we will not have long to wait.

Substituting “Likes” and “Emotions” With Tokens

Even if Facebook introduces a “cryptocurrency” in its platform, it will most likely be used only for value transfers between users. Value transfers could indeed be useful if they are cheap (or free), available on a global scale, and accepted by various service providers and products.

The whole dynamic of a social network could change, however, if it incorporates crypto for micro-actions, rewards for great content/information, and various user-interactions.

What is being described above is a token economy, imbued in a cryptographic protocol. A protocol is simply a set of rules that encompass allowed behavior in a network of users. The Bitcoin network was the first such virtual economy that allowed for decentralized, private money to be created, secured and exchanged between users for the first time ever. Ethereum is another example – a protocol that enabled the decentralized execution of programs (AKA “smart contracts”).

A social media network can be based on a cryptographic protocol that ensures users’ incentives are aligned.

This could have a number of positive effects, depending on the way the protocol is developed including:

  • Micro-payments instead of likes or “emotions”. The more likes a piece of content gets, the more value in tokens its author receives.
  • Better management of content if adding new content requires micro-payments.
  • Better community management and less spam, if comments/replies require a micro payment or if the author can set the price of a reply.
  • Received payments become available in real-time. No need to wait for a third-party to approve them. (NOTE: A few confirmations by the network will be most likely be required.)
  • Information filtering based on a price.
  • New features could be added by a global community if the network is open-source (public blockchain platforms usually are).
  • New opportunities for advertisers, who can collaborate directly with content creators.

There are already social media platforms out there that feature a token economy and micro-cryptocurrency payments. Here are the ones that I found most interesting:


Income From Anywhere.

The guys from Cent get it. They believe that social media networks are better described as content networks and since almost 100% of the content is being created by the users, they should receive the lion’s share of the value.

Given that social networks are actually just content networks, it’s odd that Facebook is valued at over $400B while nearly all users of the platform make $0 for producing its content. [Source]

Moreover, Max Brody and his co-founder Cameron, are convinced that machines and algorithms will continue to replace humans in the future, causing catastrophic unemployment. A decentralized economy based on blockchain technology could address this by providing an alternative source of income for everyone. According to Max, humans can continue to earn value indefinitely by relying on their unique perspectives and creativity.

Perspective, in this context, is your unique angle of view on the world, your subjectivity, your personal feelings. Creativity is what you make when you use your perspective. [Ibid.]

With these ideas in mind, Cent enables its users to “seed” posts they like and receive part of all “seeding” that happens after that. In other words, if you seed a post that is enjoyed by users after you, you get part of the reward for having identified it as useful, quickly. In addition, the author of the post receives the larger part of the reward.

Cent is based on Ethereum and is integrated with MetaMask, allowing users to quickly join the network and start “seeding” with ETH.

Here is an example of a user, who did a recap of all the interesting news that happened in the cryptocurrency space in the last 24 hours:

For the same post in Twitter, the content creator – Matthew Willemsen – received 5 likes. His post has so far earned 8.44 USD in Cent with 13 hours more to go. That amount will be spread between the author and his content “seeders”.

The reward mechanism featured in Cent rewards user interactions and helps authors earn more and reach more people. According to Cent’s leaderboard, there are more than 10 users who are earning more than 100 USD per month by simply creating useful content.

This is why content creators will turn to alternative platforms featuring cryptocurrency payments.

I personally loved the philosophy behind the Cent platform and joined the network. I hope the team continues its work on the project and introduces more features in the future.


Social Network For Good.

Although I am not a fan of EOS due to its consensus building process and lack of immutability (+ some believe it is not actually a blockchain), I must admit that KARMA is built with the right ideas in mind.

According to its Co-Founder – Dallas Rushing:

KARMA is a decentralized application built on EOS that looks like Instagram and incentivizes people to do good, positive things in the world.

The idea is simple, KARMA allows users to have beneficial interactions in the world, post them and receive KARMA by other users up-voting their post. By doing so, a positive feedback loop between beneficial human interactions and a tokenized incentive is created – a token economy that stimulates good deeds. Users who share their charitable actions with the world, as well as users who re-share them get KARMA tokens which they can stake (learn more here) or sell for other tokens on a number of exchanges.

The entry barrier to the KARMA economy however, is still high for the average user, requiring a private EOS wallet key to be entered upon registration, as well as CPU resources for future interactions (for posting of content, for example). Nonetheless, the KARMA app is already available in Google Play and the App Store and with further work, could become a reason for people to look at EOS. According to Dallas, it is quickly gaining traction.


A social media platform where everyone gets paid for creating and curating content.

Click for a larger image.

Steemit is by far the most popular blockchain-based social network that features a token economy. It was launched in 2016 and since then has managed to attract more than 1.2m user registrations. The number of daily active users is just below 600k. That is really impressive!

Larger image is not available. More Steemit stats here.

The scale of the network means that there are some great opportunities for content creators to earn real money by sharing useful content. Here is an example of an author, who frequently earned more than 100 USD per article on various topics.

Steemit features a unique economy based on three types of tokens – Steemit, Steemit Power, and Steemit dollars. Steemit and Steemit dollars act as currency, while Steemit Power acts as reputation – the more you have of it, the more value your actions in the Steemit network have. You can find a detailed explanation on how Steemit works in this piece by Colin Adams:

Steemit.com is actually built atop the Steem blockchain, a standalone blockchain protocol that allows for the creation of social media platforms on which creators of content are directly rewarded for their effort. It is definitely one of the most successful examples of a decentralized application and an a well-calibrated token economy.

Likes won't do it. Your tokens could.

Incorporating tokens to incentivize the creation of useful content, good behavior and positive feedback loops is the future of social media platforms.

Facebook seems to realize that, but it remains unclear if it will be able to adapt fast enough and well-enough to the emerging trends. As with another “killer-app” for blockchain platforms – prediction markets -perhaps it is time for social media to be disrupted by the idea of:

Putting your money where your mouth is.

You like a photo, an event, an article or an ad? How much do you really like it? Are you willing spend some of your tokens on it? If not, then you don’t like it that much and you shouldn’t be stimulating someone’s “online gratification” addiction by liking their worthless content.

Facebook likes are useless, even unhealthy. We will slowly move to decentralized, token-based content network economies that value unique human perspectives and creativity of online communities.

At æternity we are actively working on an efficient, secure and easy to use blockchain infrastructure that could accommodate the token-economies of the future. Content networks (AKA social media networks) are certainly part of this future.

If you have a project or a project idea that aims to disrupt the way content creators are rewarded – we will be interested to hear it. Start a discussion in the Forum and change the world.

Read the first two part in the series:

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