Five companies virtually control everything we see and do online. And we're over here trying to decide which billionaire we want to censor us. So whoever is going to own Twitter doesn't matter because it's only a band-aid solution to the big problem to solve.

The solution to the centralization of the financial system wasn't to put warren buffet in charge of money. Instead, it was to use technology, namely Bitcoin, to overhaul and decentralize it completely.

At DeSo, we're changing how people think about social media's centralization. The current social media ecosystem is more centralized than finance was when Bitcoin was invented. 

Think about it this way: There are only five corporations that control social media, but there are hundreds if not thousands of banks and financial institutions to choose from.

When you decentralize social media from these five corporations, it unlocks innovations, ingenuity, and competition from a global talent pool. Current social media ecosystems are closed off, and no one can build on them unless they want you to.

Centralized social media platforms are at a crossroads. They are raking in billions of dollars but risk becoming irrelevant if they don't innovate.

They are facing a looming threat called the blockchain business model. Zuckerberg sensed it several years ago when he tried to launch Libra but was eventually blocked.

If you're in web3, you're aware of how quickly things can change – Turning Twitter into a web3 company when they have a history of not being able to ship products is a tall task. But, if anyone can do it Elon Musk can, and if he pulls it off, it creates another road to success for DeSo by integrating with them instead of outright competing.

The introduction of the blockchain business model puts the incumbents in an awkward position as it threatens their revenue streams.

Let's explore some of the blockchain business model concepts to highlight the interesting problem centralized social media companies face today.

This will be the first blog in a series breaking down the most recent Nader Theory blog post.

The Ads-Driven Business Model

Twitter's business model is simple:

• Users generate content
• Users browse content through Twitter's app
• Twitter generates revenue by showing ads to users browsing content on its app
• Twitter runs ads
• Twitter doesn't allow anyone else to run an app or monetize their feed of content

Twitter can't show ads effectively on apps it doesn't control. 

If the attention goes elsewhere, Twitter loses advertising dollars. Twitter is incentivized to:

• Monopolize users content
• Centralize content
• Centralize their app experience
• Moderate ruthlessly

This is at the expense of society and content creators as a whole. 

If they don't do the above, they can't extract advertising dollars from their clients. If there's content on their platform that their primary user base doesn't like, they ignore freedom of speech and remove it.

Their livelihood depends on it. 

If they don't remove it, they risk losing their only source of revenue. It's a cycle that Twitter and other centralized social media companies have no incentivize to change.

Why would they? 

They're raking in billions of dollars despite the negative impact it can have on society.

Interestingly, Twitter and Facebook started as open platforms where any developer could build.

An open model allowed them to capture network effects. 

However, an open model that captures network effects is bad at generating revenue.

Once the networks grew large enough, they shut down the open model to start monetizing.

This increases revenue for centralized social media companies but stifles competition and innovation.

And as we've witnessed in web3, innovation compounds over time if you let it.

The Blockchain Business Model

Social media is more centralized than legacy finance was when Bitcoin was invented. It's crazy to think, but it's true!

However, there is a solution: the blockchain business model.

Storing content on a public blockchain can outcompete the traditional ads-driven business model at scale, resulting in new product possibilities.

But blockchains have historically been too slow and expensive for infinite-state applications like social media.

Infinite-state application = storage needs go up as more content is produced.

People don't care about decentralization, trustlessness, permissionlessness, or anti-censorship if the user experience is bad and it costs too much.

All they care about is posting, and they don't want to worry about budgeting the amount of content produced with their other bills.

Two hundred characters on Ethereum cost $80 – If Twitter forced you to keep a credit card on file to charge you $80 per tweet, they would have never even existed.

Additionally, credit cards are too expensive for tiny transactions and very unreliable for large transactions due to the risk of chargebacks.

So, tipping, microtransactions, or micro-subscriptions weren't possible until recently. But, once you break it down, you can start to see how we got on this ads-based model in the first place. 

Our financial system wasn't built to account for microtransactions like a blockchain.

Imagine launching an NFT project and people disputing 10 ETH buys after the price goes down? It would crush your project, and there would be no NFT market like there is today.

A fee-based business model makes more sense if social products can leverage microtransactions and macro transactions than the current ads-based one.

Why?

If a platform monetizes via fees, suddenly, the need to keep all content "closed" ceases to exist. On the other hand, opening up content results in more people building apps on the network resulting in more social transactions and fees.

Which then incentivizes keeping all of its content open forever instead of closed, creating a way for us to get the value-creation of the open business model for social without losing the incentive to develop the network.

The fee-based model IS the blockchain business model. 

Interestingly enough, blockchains are good for creating novel money-enabled products and supporting open content.

It is unique that both those properties coincide in a single technology, but that's why we call it disruption.

If blockchains solve all these unique problems, why hasn't a Twitter killer emerged?

Blockchain storage costs were too expensive to scale content on decentralized social media applications until DeSo was launched just last year.

DeSo is the only blockchain out there with working decentralized social media applications. 

The Solution

Hopefully, you now understand how we got into this mess (micro/macro transactions), how the blockchain business model fixes it, what challenge centralized social media companies are facing, and how DeSo is the solution.

Next week we'll break down the antifragility of blockchain platforms and how a single killer app could change everything.

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