Viewpoint: How can Farcaster reshape SocialFi?

Author: Chen Mo cmDeFi

Key Points: Farcaster is a decentralized social media protocol that provides developers, creators, and ordinary users with an open and composable social layer.

At the user level, it focuses on privacy protection and autonomy. At the protocol level, it focuses on being open source and permissionless. At the product level, it advocates for "mini-program" level interactivity, allowing users to directly access a variety of services and applications through Frames embedded in social media posts.

1. Decentralized Architecture: Operates on the blockchain without relying on central servers.
2. User Control: Users have full control over their data and social graph, maintaining their identity even when applications are restricted.
3. Open Source and Permissionless: Anyone can access Farcaster's API or applications to build new applications.
4. Composability: Provides a platform-level social layer where applications can be combined and support unified social identity access.
5. Hybrid Architecture: Combines on-chain and off-chain systems to improve system efficiency and response speed.
6. Frames Feature: Allows users to embed small applications in posts, enhancing interactivity and user experience.

Solution Analysis

Currently, SocialFi has two main directions:

• Financialization - Friend tech
• Primitive Layer Transformation - Farcaster

Essentially, Farcaster belongs to the transformation of the primitive layer, closer to the concept of "Layer," making it possible to build financialized services based on "Layer" and derive more extensive application scenarios.

Farcaster is implemented through a hybrid on-chain + off-chain architecture, where user identity and key information are handled on-chain, while content storage, verification, and propagation are handled off-chain. For example, Alice can create a message "Hello Bob" and sign it with her key. The message is stored on a server node named "Hub," with each Hub storing a copy of the entire network, forming a new social consensus layer. Users can publish a message to a Hub, and the message will spread throughout the network within seconds.

1. On-chain Component

Farcaster's on-chain elements mainly include smart contracts running on Ethereum's Layer 2 (Optimism), handling core functions such as:

• ID Registration: Generating key pairs associated with new users' Ethereum addresses to ensure the uniqueness and security of their identities.
• Storage Registration: Managing the allocation of user data storage space and collecting annual fees to ensure reliable data storage.
• Key Registration: Managing users' public and private keys, allowing users to authorize and revoke control of their accounts for secure message signing and identity verification.

Regarding storage registration, it is akin to the concept of buying space to post. A Farcaster account must pay rent to keep its messages on the Farcaster network. The purpose of charging rent is to prevent users from sending spam messages to the network. In other words, using Farcaster requires an annual payment of $5-7, which may not be very user-friendly in the early stages, but it is a way to maintain efficiency and performance when the network is not robust enough.

2. Off-chain Component

Farcaster's off-chain elements include a set of servers called Hubs, which run on traditional hardware and are responsible for handling data operations that do not require on-chain confirmation to speed up response times and reduce transaction costs. Specific functions include:

• Message Processing: Hubs receive, verify, and store Casts (content published by users). They check the validity of each message's signature and whether it complies with the user's on-chain registered identity information.
• Data Synchronization and Propagation: Once messages are verified, Hubs store them locally and synchronize with other Hubs in the network to ensure data consistency and reliability.
• Performance Optimization: By handling a large amount of data interaction off-chain, Hubs can significantly reduce the demand for on-chain transactions, reducing latency and costs. This is particularly important for social networking platforms, as they need to handle a large volume of real-time interactions.

Social Optimization

Through this hybrid architecture, users' social relationships and interactions on Farcaster have been optimized in various ways:

1. Autonomous Identity and Key Management: On Farcaster, users create a unified identity on-chain (via ID registration contract), associating this identity with their Ethereum address and generated key pair. Through key management, users can securely control access and authorization to their accounts, independent of any third-party services, ensuring that only the user can control the use of their identity. Therefore, in traditional social software, situations like your username being reclaimed by the platform will never occur.
2. On-chain and Off-chain Data Isolation: By handling core security functions (such as identity verification and authorization) on-chain and non-sensitive social interaction data (such as message delivery and social graph construction) off-chain, Farcaster can maintain user privacy while providing a fast application experience.
3. Decentralized Storage: Data storage on Farcaster is decentralized, meaning data is not stored on a single server but protected through a distributed network. This increases data censorship resistance and attack resilience. As this consensus grows stronger, storage becomes more decentralized, providing better underlying support for Farcaster as a whole. Similar to how Chainlink establishes a distributed oracle network, as its DON nodes mature, the security and stability of the entire oracle will greatly improve.
4. Autonomous Control over Data Access and Sharing: Farcaster can precisely control data access permissions through smart contracts. Users can determine who can see their social activities and personal data, with these settings embedded directly on-chain and executed by smart contracts. This approach allows users to fully control the level of information sharing, and different applications can access a user's social graph data based on user authorization.
5. Interoperability and Composability Across Applications: With Farcaster providing APIs and developer tools, third-party developers can create applications compatible with Farcaster identities, allowing users to interact with different social media applications using the same identity. This is akin to the level of embedded interactivity seen in WeChat mini-programs, providing a more diverse "mini-program" ecosystem without the need for permission.

In the recent period (May 2024), Farcaster's daily active users reached a new high.

Frames

Frames are essentially small applications embedded in Farcaster posts, turning posts into interactive platforms rather than just static content displays. Users can access various functions and services directly within social media interactions, without leaving the Farcaster platform.

For example:

• NFT Interaction: Users can mint, showcase, or trade non-fungible tokens (NFTs) through Frames. For instance, an artist can directly showcase the NFTs of their artwork in a post and provide options for purchase or bidding.
• Games: Developers can embed simple games directly into posts, allowing users to play games while browsing social media.
• Content Subscription: Allows users to subscribe to newsletters or other media content. Content creators can offer dedicated subscription buttons through Frames.

Asset Issuance

In a sense, a new way of asset issuance has emerged on Farcaster, breaking the traditional concept of SocialFi. In SocialFi, Fi is usually designed for the economic model of the social project itself to incentivize creator and user participation. For example, Friend tech achieves revenue creation by tokenizing creators and content.

The "Layer" attribute of Farcaster not only completes the underlying transformation of Social but also provides a new way of asset issuance, fundamentally changing the traditional notion of "Fi" in SocialFi. Instead of designing complex financial structures for itself, Farcaster provides this openness to the community and developers, becoming a launchpad for community tokens, community culture, and community ecology.

While Farcaster's user threshold may not be conducive to user expansion, it has garnered very high user purity, with over 90% of daily actives coming from native crypto users.

Ultimately, from providing an asset issuance environment to relying on its high-purity user base, Farcaster has laid a solid foundation for project operations, promotion, and community development.

Ecosystem Economy - $DEGEN Token

$DEGEN is an extremely unique token in the Farcaster ecosystem, not issued by the official entity but a community-driven memecoin. It has become the first-generation token in the Farcaster community and is being used to build peripheral applications and ecosystems around DEGEN.

• Sharing and Tipping: DEGEN can be used to tip content creators in the community, promoting content sharing and community engagement.
• NFT Minting: On platforms like Zora and Highlight, users can use DEGEN to mint NFTs, increasing their circulation in the art and collectibles market.
• Trading: DEGEN
• Used for transactions within various applications and games, such as Drakula and Bracket game.
• Community Development: DEGEN is also used to support and fund community projects, such as development and operation on Degen L3.

Drakula: A short video application on-chain similar to TikTok, where users can use DEGEN for content rewards and interactions.

Clubcast: An on-chain platform similar to Patreon, allowing content creators to provide exclusive content through token-gated channels.

ConsenSys: When facing a warning from the SEC, its founder Joseph Lubin collected DEGEN in Farcaster and stated that any DEGEN tips received would be used to defend the Ethereum ecosystem. Many members of the crypto community participated in tipping to show support.

Ecosystem Economy - Warps Points

In the Farcaster ecosystem, Warps Points are an important component designed to incentivize and reward user social interactions and participation. As an internal points system, Warps Points not only enhance platform interactivity but also provide an incentive mechanism to encourage active community engagement.

1. Ways to Earn Points

• Active Participation: Users engaging actively on Farcaster, such as posting content, commenting, sharing, etc., can earn Warps Points. This design encourages users to use the platform more frequently and share valuable content.
• Completing Tasks: Farcaster may set specific social tasks or challenges, and users can earn Warps Points upon completing these tasks.
• Community Contribution: Users contributing to the community, such as content creators or technical supporters, can earn Warps Points through community recognition or direct rewards.

2. Ways to Use Points

• Payment: Users can use Warps Points on Farcaster for specific activities, such as participating in social events or purchasing social features.
• Creating New Channels: Users can use points to create new social channels, which may revolve around specific themes or interest groups.
• Gifting Points: Users can gift points to other users as a reward for their content or interactions.

3. Points Management and Issuance

The Warps Points system is centrally managed by the Farcaster team, meaning the issuance, distribution, and rules of points are determined and controlled by platform administrators. Therefore, Warps Points are not equivalent to tokens and are a functional point system within the Farcaster ecosystem.

Open and Composable

Farcaster is essentially a large-scale on-chain + off-chain ecosystem database, based on which various front-ends can be built to provide users with different user experiences. This has several benefits:

• Decentralization, where restrictions on one front-end do not affect user access to other front-ends.
• Ecosystem Diversification, allowing developers to focus on developing front-ends for specific areas such as article content platforms, live streaming platforms, social platforms, etc. The composability between applications will also provide limitless imagination for the Farcaster ecosystem's potential.

Currently, Warpcast is the most popular and widely used front-end, offering an experience similar to Twitter. However, other front-ends are also becoming increasingly popular, such as:

• Bountycaster: Serving as a task committee where users can post or complete tasks in exchange for bounties or monetary rewards.
• Kiosk: Focused on live streaming, providing a platform for real-time interaction and content sharing.
• Unlonely: A new Farcaster client that recently received $10 million in funding from a16z and Electric.

Advantages and Challenges

The challenge in the SocialFi track lies in the inability to answer the question "why stay," as the Social aspect in the Web3 world faces inherent weaknesses in user experience and barriers compared to platforms like Twitter and WeChat. Previous solutions have used "Fi" to incentivize users, attracting creators to tokenize their value and help them monetize, shifting the burden of product thresholds, experience, and traffic to creators. Farcaster functions more like a Social Layer, where Fi, NFTs, music, games, and all other developable applications can exist. This ecosystem is developer-driven, community-built, and creator-involved.

Where are Farcaster's Advantages?

Frankly, the concept of Farcaster is not novel, but its advantage lies in having achieved initial user retention and retaining a large number of Crypto-native users who are actively engaged. The platform has not issued its own token yet but has managed to align creators, developers, and ordinary users based on commonalities and attraction, rather than solely relying on "Fi" to retain users.

What Challenges does Farcaster Face?

From the perspective of the Chinese community, the current requirement for "entry fees" to be paid through credit cards poses a barrier for Chinese users, as it does not support native crypto payment methods. Direct crypto payments would be more favorable for expanding the user base. Long-term growth will test the capacity of Hubs to handle increasing user volumes and the social consensus of the Hubs network. In terms of the ecosystem, forming a positive content cycle is crucial, as Social products primarily rely on visual elements, making any content (good or junk) highly visible to users. Therefore, managing garbage information in Social products is more critical than dealing with junk code on smart contract networks, as seen in the past with numerous Web3 Social products filled with adult content and scams, leading to their demise. However, the decentralized nature often avoids manual intervention in content production, so balancing this seemingly contradictory point and forming a sustainable development with a long-lasting positive cycle is key to changing user habits.

How can Farcaster Break into the Mainstream?

In terms of "breaking into the mainstream," Farcaster's current task is to attract and retain Web3 users from Twitter. For creators, the increasing emphasis on account autonomy is crucial, especially for those who have experienced Twitter account suspensions, as they understand the significance of decentralization and autonomy. Farcaster is not currently a product like NFT Summer that can attract and consume outsiders, but rather targets internal users. For internal users, its openness, developability, and composability perfectly align with the crypto spirit, pulling internal users onto the Social Layer of Web3 is Farcaster's way of "breaking into the mainstream."