Centralized versus Decentralized Social Media Platforms

Social platforms like Facebook, Twitter or Reddit are centralized, whereas the likes of Steemit and HyperSpace are decentralized.

In centralized platforms, money is used to buy in bulk the attention of the participants in the sharing process, whereas in decentralized platforms, money — or the underlying token “printed” by the platform — is used to determine the value of the shared content and rewards the participants directly.

But that’s just the tip of the iceberg. Let’s see what lies beneath this first layer.

Attention-based Economies

Both centralized and decentralized social media platforms are, at their core, attention-based economies. The output of all the processes in such an economy is attention.

Turns out that attention is a valuable commodity. It can be sold to third parties, or it may be used by various actors in order to determine a certain course of actions.

The first use of attention is obvious, but the second one deserves a bit more detailing. By “determining a certain course of action” I understand the ability to influence someone to do something. Being it to vote for a specific party in political elections, or to convince somebody that the earth is flat, it means modifying a certain behavior in a certain direction. The moment you got someone’s attention, you get a chance at influencing that person.

Most of the people in social media are aiming just at getting validation, in the basic forms of likes, retweets or comments. So they want to influence other people to give them likes, or to appreciate them (or their posts) in some way.

Production and Running Costs

Both centralized and decentralized social media platforms have production and running costs, like all businesses.

In centralized platforms, the production and running costs are centralized, and they are supported by a single entity, the so-called “owner” of the platform. Facebook code is belonging to Mark Zuckerberg (highly simplified assumption, I know), Twitter codebase belongs to Twitter Inc, etc.

The running costs, like servers, bandwidth, maintenance and support are also supported by the owner.

In centralized platforms, the owner, a single entity, is incentivized to first cover the production and running costs, and then generate profit. The users of the platforms are not participating at these costs, hence they don’t get a say in how the spending goes on let aside in how the profit is generated.

The monolithic nature of the owner makes the profit generation opaque to those who are actually generating it.

In decentralized platforms, the production and running costs are split amongst a number of actors. I find this more obvious in Steemit, where the entire infrastructure is maintained by a number of independent witnesses, which are elected publicly and can get promoted / demoted in real time by the stakeholders votes. All witnesses are providing infrastructure, and some of them even code to the public codebase — which, in the case of Steemit, is open source.

Following their involvement, witnesses literally get a portion of the revenues of the platform (in the form of minted tokens), hence they are becoming a collective owner.

In decentralized platforms, the collective owner is incentivized to maintain the platform, because they get rewarded only when the platform is functioning. The users of the platform are directly participating at the election process, hence they do have a say in how the spending goes on and how the profit is generated (in practice, this is less likely to happen, though).

The transparent nature of owners makes the profit generation visible to those who are actually generating it.

Profit Generation

In centralized platforms, profit is made by selling attention to third parties (advertisers, most of the time). That’s quite obvious and I won’t insist on it.

In decentralized platforms, profit is made in a very different way. Simply put, the profit generated in a decentralized platform is directly proportional to the value of the entire platform, expressed in the platform tokens.

By reading this again I realized it may not be as simple as I wanted, so here we go again: a decentralized platform is owned collectively by all the contributors, because they get invested in some way. In Steemit, one of the most obvious mechanisms is staking the coins, in the form of Steem Power. So, if the owners of the platform can generate more attention, the perceived value of the platform is increasing. Hence, the underlying token which defines that value, will increase. If more people will come and read articles, that means more attention, which will directly convert into more perceived value.

It may be difficult to wrap your head around this mechanism, and one may be quick to dismiss it using the question: “but what can you buy with those tokens? where is the demand?”. This position comes from a distorted perspective on money, as a concept, which is largely defined as a medium of exchange. Although this function of money, being used in exchanges for goods or services, is totally real and true, its fundamental quality and the thing that actually defines it is, in fact, trust.

Money is perceived value over a continuum of interaction, in a population of actors, based on trust.

The definition above is from a book I’m working on (hopefully to be ready in the next 2–3 months — it will come even with nice drawings and stuff, so keep an eye on my posts, if you want to know when it’s out)

To make a long story short: money is definable by the amount of trust in a given circle of people. If all people in a room agree that a piece of paper will give them an apple, then that piece of paper is as valid as gold, notes or cryptocurrencies. Because all the actors participating in the exchange trust they will get an apple for that piece of paper.

The same thing happens in a decentralized platform: all participants agree on a set of rules, and, even more, they enforce their agreement with tokens. As such, those tokens start to get value. First, in that specific population of actors, then, if the impact of that population is big enough, value will spread to other layers, outside the initial ecosystem.

(intially published on HyperSpace)

Story teller, geek, light seeker and runner. Not necessarily in that order.