cmDeFi: Farcaster reshapes SocialFi under the starry night of encryption

Author: Chen Mo cmDeFi, Source: Twitter @cmdefi

Core idea: Farcaster is a decentralized social media protocol that provides an open and composable social layer for developers, creators and ordinary users.

The user level focuses on privacy protection and autonomous control, the protocol level focuses on open source and permissionless, and the product level advocates "mini program" level interactivity, and directly accesses a variety of services and applications in social media posts through Frames.

1. Decentralized architecture: does not rely on central servers and runs on blockchain.

2. User control: users have full control over their data and social graphs, and users still retain their identities even if the application is restricted.

3. Open source and permissionless: anyone can access Farcaster's API or application to build new applications.

4. Composable: provides a platform-level social layer, which can be combined between applications and supports access using a unified social identity.

5. Hybrid architecture: Combining on-chain and off-chain systems improves the efficiency and responsiveness of the system.

6. Frames function: Allows users to embed small applications in posts to enhance interactivity and user experience.

Research Report

I. Solution Analysis

SocialFi currently has two main directions:

• Financialization - Friend tech

• Original layer transformation - Farcaster

Farcaster is essentially a transformation of the original layer, which is closer to the concept of "Layer". Therefore, it is possible to build financial services based on "Layer" and can derive more and more extensive application scenarios.

Farcaster is implemented through an on-chain + off-chain hybrid architecture. Key information such as user identity and keys are processed on the chain, and content storage, verification and dissemination are processed off the chain. For example, Alice can create a message "Hello bob" and sign it with her key. Messages are stored on server nodes called "Hubs". Each Hub stores a copy of the entire network. These Hubs form a new social consensus layer. Users can publish a message to a Hub, and the message will be propagated to the entire network in a few seconds.

1. On-chain part

Farcaster's on-chain elements mainly include smart contracts, which run on Ethereum's Layer 2 (Optimism). These contracts handle some core functions, including:

• ID registration: Generate a key pair associated with the Ethereum address for a new user to ensure the uniqueness and security of the identity.

• Storage registration: Manage the allocation of user data storage space and the collection of annual fees to ensure reliable storage of data.

• Key registration: Manage users' public and private keys, allowing users to authorize and revoke control of their accounts, thereby performing secure message signing and authentication.

Regarding storage registration, it is equivalent to the concept of buying space to post. Farcaster accounts must pay rent to keep their messages on the Farcaster network. The purpose of collecting rent is to prevent users from sending spam messages to the network. That is to say, the threshold for using Farcaster is to pay 5-7 US dollars per year. In the early days, this may be a setting that is not very friendly to ordinary users, but it is also a way to maintain efficiency and performance in the period when the network is not robust enough.

2. Off-chain part

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

• Message processing: Hubs are responsible for receiving, verifying and storing Casts (content posted by users) from users. They check whether the signature of each message is valid and whether it conforms to the identity information registered by the user on the chain.

• Data synchronization and propagation: Once a message is verified, Hubs store the message locally and synchronize it with other Hubs in the network to ensure data consistency and reliability.

• Performance optimization: By processing a large number of data interactions off-chain, Hubs can significantly reduce the need for on-chain transactions, thereby reducing latency and costs. This is especially important for social networking platforms, which need to handle a large number of instant interactions.

2. Social Optimization

Users' social relationships and interactions on Farcaster have been optimized in many ways through this hybrid architecture:

1. Autonomous identity and key management: On Farcaster, users create a unified identity on the chain (through an ID registration contract), which is associated with their Ethereum address and the generated key pair, and through key management on the face, users are allowed to securely manage access to and authorization of their accounts, without relying on any third-party services, ensuring that only the user can control the use of their identity. So in traditional social software, things like your username being officially recycled will never happen.

2. Isolation of on-chain and off-chain data: By processing core security functions (such as authentication and authorization) on-chain and non-sensitive social interaction data (such as messaging, social graph construction) off-chain, Farcaster is able to provide a fast application experience while maintaining user privacy.

3. Decentralized storage: The storage of user data is decentralized in Farcaster, which means that the data is not stored on a single server, but is protected by a distributed network. This increases the data's resistance to censorship and attacks, and at the same time this will establish a new social consensus layer. As this consensus becomes stronger, storage will become more decentralized, providing better underlying support for Farcaster as a whole. Similar to Chainlink's establishment of a distributed oracle network, as its DON nodes become more mature, the security and stability of the entire oracle will also be greatly improved.

4. Autonomous control of data access and sharing: Farcaster is able to achieve precise control over data access rights through smart contracts. Users can set who can see their social activities and personal data. These settings are directly embedded on the chain and executed by smart contracts. This approach gives users full control over the level of sharing of their information, and different applications can access the user's social graph data based on user authorization.

5. Cross-application interoperability and composability: Because Farcaster provides APIs and developer tools, third-party developers can create applications that are compatible with Farcaster identities, and users can interact with the same identity across different social media applications. This is similar to the embedded interactivity of WeChat mini-programs, which is equivalent to using the unified identity of WeChat account to log in to different applications, and Farcaster's permissionless entry method will bring a richer "mini-program" ecosystem.

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

3. Frames

Frames are essentially small applications embedded in Farcaster posts. They make posts more than just static content displays, but interactive platforms. Users can access various features and services directly in social media interactions without leaving the Farcaster platform.

For example:

• NFT Interaction: Users can mint, display or trade non-fungible tokens (NFTs) through Frames. For example, an artist can display NFTs of their artwork directly in a post and provide options to buy or bid.

• Games: Developers can embed simple games directly into posts, and users can play games while browsing social media.

• Content Subscription: Allow users to subscribe to newsletters or other media content. Content creators can provide dedicated subscription buttons through Frames.

Fourth, Asset Issuance

From a certain perspective, a new asset issuance method born on Farcaster breaks through the concept of traditional SocialFi. The Fi in SocialFi usually designs an economic model for the social project itself to motivate the participation of creators and users. Taking Friend tech as an example, it creates revenue for the creators by tokenizing the creators themselves + tokenizing the content.

The "Layer" attribute of Farcaster not only completes the underlying transformation of Social, but also provides a new asset issuance method, which completely changes the attribute of "Fi" in the traditional SocialFi concept. It does not design a complex financial structure for itself, but provides this openness to the community and developers, becoming a launchpad for community tokens, community culture, and community ecology.

Although Farcaster's user threshold is not conducive to the expansion of the number of users, it has correspondingly obtained a very high user purity, and more than 90% of the daily active users are from Crypto native users.

Finally, Farcaster has provided a good soil for the subsequent operation, promotion and community precipitation of the project, from providing an asset issuance environment to relying on the precipitation of its own high-purity users.

V. Ecological Economy-$DEGEN Token

$DEGEN

is an extremely special token in the Farcaster ecosystem. It is not officially issued, but a community-driven memecoin. It has become the first token of the Farcaster community and is building surrounding applications and ecology around DEGEN.

• Sharing and Rewarding: DEGEN can be used to reward content creators in the community to promote content sharing and community participation.

• Minting NFTs: On platforms such as Zora and Highlight, users can use DEGEN to mint NFTs, increasing their liquidity in the art and collectibles markets.

• Trading: DEGEN is used for various applications and in-game transactions, such as Drakula and Bracket game.

• Community Building: DEGEN is also used to support and fund community projects, such as development and operations on Degen L3.

Drakula: An onchain short video app similar to TikTok, where users can use DEGEN for content rewards and interactions

Clubcast: An onchain platform similar to Patreon that allows content creators to provide exclusive content through token-gated channels.

ConsenSys: When ConsenSys faced warnings from the SEC, its founder Joseph Lubin collected DEGEN on Farcaster and stated that any DEGEN tips received would be used to defend the Ethereum ecosystem. A large number of crypto community members participated in the rewards to show their support.

Sixth, Ecological Economy - Warps Points

In the Farcaster ecosystem, Warps Points are an important component designed to incentivize and reward users' social interaction and participation. As an internal points system, Warps Points not only increase the interactivity of the platform, but also provide an incentive mechanism to encourage users to actively participate in community activities.

1. How to earn points

• Active participation: Users can earn Warps points by actively interacting on Farcaster, such as posting content, commenting, sharing, etc. This design encourages users to use the platform more frequently and share valuable content.

• Complete tasks: Farcaster may set specific social tasks or challenges, and users can earn Warps points after completing these tasks.

• Community contribution: Users who contribute to the community, such as content creators or technical supporters, can earn Warps points in the form of community recognition or direct rewards.

2. How to use points

• Pay fees: Users can use Warps points to perform specific activities on Farcaster, such as participating in specific social activities or purchasing social features.

• Open a new channel: Users can use points to create new social channels, which may be organized around specific topics or interests.

• Give points: Users can give points to other users as a reward for their content or interaction.

3. Points management and issuance

The Warps points system is centrally managed by the Farcaster team, which means that the issuance, distribution and rules of points are formulated and controlled by the platform administrator. Therefore, Warps is not equivalent to tokens, but a functional point within the Farcaster ecosystem.

Seventh, open and composable

Farcaster is essentially a large-scale ecological database on the chain + off the chain. Based on these "data", any form of front-end can be built to provide users with different usage experiences. This has several advantages:

• Decentralization, even if a front-end is restricted, it will not affect users' access to other front-ends

• Ecological diversification, developers can focus on developing front-ends in a certain field for users to use, such as article content platforms, live broadcast platforms, Moments platforms, etc. At the same time, the composability between applications will also provide unlimited imagination for the ceiling of the Farcaster ecosystem.

Currently Warpcast is the most popular and most used frontend, and its experience is very close to Twitter, but other frontends are also becoming more and more popular, such as

• Bountycaster: acts as a work board where users can post or complete tasks in exchange for bounties or monetary rewards.

• Unlonely: focuses on live broadcasting and provides users with a platform for real-time interaction and content sharing.

• Kiosk: A new Farcaster client that recently received $10 million in funding from a16z and Electric.

VIII. Advantages and Challenges

The challenge of the SocialFi track is that it is usually impossible to answer the question of "why stay", because the Social in the Web3 world is inherently weak in experience and threshold compared to Twitter and WeChat. Therefore, the previous solution was to motivate users in the name of "Fi" and first attract creators to settle in. In essence, it is a solution to tokenize the value of creators to help them realize their value. The problem with this solution is that it throws product thresholds, experience, traffic and other issues to creators. Because you can make money, you have to attract your fans to interact on the platform.

Farcaster is more like a Social Layer, which can have Fi, NFT, music, games and other developable applications, and this part is completed by developers, so this is an ecosystem led by developers, co-built by the community, and participated by creators.

What are the advantages of Farcaster?

To be honest, the concept of Farcaster is not new, but its advantage is that it has completed the initial user sedimentation and retained a large number of Crypto native users. These users have also really "played" and the user activity data this month has also reached a new high. At present, Farcaster has not issued its own tokens, but it has basically achieved the commonality + attraction of creators, developers, and ordinary people, rather than relying solely on "Fi" to retain users.

What challenges does Farcaster face?

From the perspective of the Chinese area, the "entry fee" for registration and storage currently needs to be paid by credit card, and does not support crypto-native payment methods. This is a threshold for the Chinese user group. If it can be paid directly through cryptocurrency, it will be more beneficial to the expansion of the user group. In the long run, the growth of the number of users will be accompanied by a test of the carrying capacity of Hubs and the social consensus of the Hubs network. From an ecological perspective, how to form a positive cycle in content is very critical, because the characteristics of social products are usually based on visual elements, and any content (good/junk) will be very intuitively presented to users, so the spam in social has a more serious negative impact on users than the spam code on the smart contract network. For example, N Web3 Social products were born in the past, which were full of pornographic and fraudulent information, gradually lost control and died out. However, the characteristics of decentralization are often not to intervene in the production of content through human intervention. Therefore, how to balance and form sustainable development on this seemingly contradictory point is also a challenge for the future. Long-term and continuous positive cycle is the key to changing user habits.

How does Farcaster go out of the circle?

On the issue of "going out of the circle", Farcaster's current task is to attract and retain Web3 users on Twitter. For creators, the autonomous control of accounts is increasingly valued, especially those who have experienced Twitter's account suspension, who can more deeply understand the meaning of decentralization and autonomous control. At this stage, Farcaster is not a product like NFT Summer that can attract outsiders to settle in and consume. Its target is users in the circle. At the same time, for users in the circle, its openness, developability, and composability perfectly fit the spirit of encryption. Pulling users in the circle to the Social Layer belonging to Web3 is Farcaster's "out of the circle".