Financializing Social Media Platforms

In a world where applications and protocols can have tokens in an attempt to drive user engagement and growth, the introduction of such a mechanism to social media platforms and its implications can be fairly nuanced. It's easy to see how value capture of social interactions can necessarily end up being conflated with financialization of social identity. This is reasonable given the “skin in the game” rhetoric. The more interesting area to explore though is: as the web 2.0 social media platforms have matured, we’ve seen how our behavior has reflexively changed to operate alongside questionable incentive structures. As a species we’re emotionally driven so the prospect of getting likes and retweets speaks to our primal need for the constant tribalistic validation cycle.

Simple attempts at tokenizing current social media platforms such as having each user have a token can easily end up as a way of quantifying and pricing our every online move. They could become instruments that financially capture the essence of what we’ve been already doing on social media. As such, an unsurprising power law kicks in for the coin price of the ultra popular folks. Ultimately, these platforms end up enabling ways to realize financial markets and further manipulate incentives around social behavior to drive speculation and short term profits. So strictly relying on coins and coin prices seems like a suboptimal use of such platforms.

As Richard Fischer recounts in his book The Long View about how financial markets can economically effect people in the short and long term,

"As a deep recession endured, [John Maynard] Keynes continued to cling to his optimistic view of the long run, predicting greater prosperity and leisure eventually. He republished updated versions of 'Economic Possibilities' as a more formal essay. But by the mid 1930s, he was also raising some of the first concerns that short-termism was taking root in the financial markets. Unfortunately, it is this diagnosis that has proved more accurate with time.

In 1936, he observed a new trend in the behavior of investors who he saw as taking a short view to make a quick profit. 'They are concerned, not with what an investment is really worth to a man who buys it 'for keeps', but with what the market will value it at, under the influence of mass psychology , three months or a year hence,' he wrote.

'The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future,' he argued, but what he was beginning to observe instead looked more like a game. 'The most skilled investment to-day is 'to beat the gun', as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow'.

This wasn't necessarily 'wrong-headed', he wrote, rather the inevitable result of the way the market had been built to incentivise short-term speculation. 'It needs more intelligence to defeat the forces of tiem and our ignorance of the future than to beat the gun,' he concluded, but sadly the structure of the market was incentivizing the latter."

As for a token-enabled social media platform, it's easy to see how for the already-wealthy, buying access to any type of interaction or experience isn't too innovative. They can afford to buy any coin to enable said desired social interaction. But in a world where a significant portion of human behavior comes from signaling, and especially more so when public ledgers exist / transactions are always monitored, what does a rich person spending relative pennies for access really mean? Are there other ways of potentially measuring or designing robust systems for motivating and capturing more interesting signaling?  

In designing such systems we have to be careful to not succumb to metric fixation and end up with the negative effects of the process that could lead us to Goodhart's law which says, "When a measure becomes a target, it ceases to be a good measure."

For the initiated, the concept of proof of work has merit and integrity. What if we applied a similar lens to social dynamics where interactions could be fueled by scarcity along different dimensions? Just to briefly explore a few examples, let's look at proof of time, proof of skill, and proof of location. All of these proofs would be similar to NFTs in that they are non-fungible but the restriction is that they can't be transferred, they could be conditionally redeemed, and are strictly tied to one identity. By having alternative ways to prove your association with a person, an event ran by a person, etc. you could share in the upside of that person's social clout rising while simultaneously proving how you were involved with that rise, as opposed to just deploying capital.

• Proof of time: any event where you were involved in something that later increased in value (for bitcoin you could have bought it; for an underrated artist you discovered early on and blew up later, value capture is hard [see celebrity bond])
• Proof of skill: publicly gaining competency in something and having a direct reference to said verified competency for redeemability later on contributes to social capital. There could be a seed list of verified people with competency across different verticals, who'd vouch for work that's publicly done by up and comers and receive tokens in return. At a later time and assuming these new people create more value, the people who vouched would have exposure to this price reflected in this value creation.
• Proof of location: already being done via poap.xyz for both in-person and virtual environments.
  

This is all to say that social capital production and capture doesn't strictly need to be financially driven, though there could be cases in which it makes sense to have financial integration in the user flows.

There are also interesting ways to leverage ZK as a tool for enabling alternative social network designs that touch on identity from a different angle than discussed here, the privacy vs transparency tradeoff, and how its effects on information dissemination across different levels of society impact the decisions we make and their implications that we live with. We'll explore this topic in a future post.