At the peak of the 2021 bull market, GameFi, a blockchain-based combination of gaming and finance, arose as one of the biggest winners in the Web3 market. One of the greatest champions of the GameFi sector was the play-to-earn (P2E) game Axie Infinity. Only three years after its initial funding, the game’s AXS token skyrocketed to a total market cap of $43.2 billion and reached a daily revenue of over $17.5 million.

Even as the bull market hype dies down, GameFi apps continue to be developed and enjoy a significant amount of attention. In the second quarter of this year, blockchain-based gaming made up 52% of unique active wallet activity. GameFi has become a dominant force in crypto, amassing a high of 60% of all blockchain activity in July.

As the market consolidates and we wait for another bull market to return, blockchain builders are already building the next big breakthrough into the Web3 market. We got the opportunity to talk to Bit islands founder Craig Simons to hear why he believes web3 social (“SocialFi”) will be the GameFi of the next bull market.

Simons is a founding team member at Bit islands. He entered the crypto segment in 2017 after being a core member of a highly successful IT company back in the Web2 era. As a successful person, he is exceptionally low key, with little to no information found about him on social media. He avoided discussing past experiences and was even more reluctant to share his successes in the Web2 era, arguing that Web3 is a new technology cycle and that past experiences can become a burden that hinders innovation.

In our conversation, we discussed the issues of Web3 social, such as entrepreneurship, innovation paths, native scenarios, privacy, data value, data silos, economic mechanisms, governance ethics and other topics in this emerging market. With Simons’ permission, I wanted to bring up this conversation in the hope that it will provide new perspectives ahead of the interview.

Q:

SocialFi, like GameFi, is looking to move a staple of Web2 into Web3. Do you think there’s a need for social platforms on Web3?

A:

Today’s social environment is entirely controlled by a few social-media giants. These giants control our data and limit our freedom on the internet through censorship, leakage, silos and data abuse.

When you recognize these massive issues in Web2 and the opportunity Web3 has to eliminate these giants, the question becomes, do we need freedom?

Jack Dorsey, the former CEO of Twitter, said that Twitter should become a protocol-level public product. Compared with a radical overhaul, a more typical approach is to complete the Web3 transformation by adding blockchain elements to the Web2 social products.

Some people chose to make a sharp break with Web2. They plan to create infrastructures that anyone can use and are not controlled by anyone by making open-source protocol modules.

In addition to the two mainstream paths of “reformists” and “open-source protocol module

producers,” another maverick exists. It calls itself the “revolutionary” and “completed application & experience provider.” It’s the Web3 social startup Bit islands.

Q:

Why did you choose Web3 social as your business direction?

A:

What the internet brought essentially is an information revolution. The organizing format of information has undergone several significant changes.

The Web1 era witnessed manual classification of small amounts of information (catalog) and mechanized classification of large amounts of information (search). The essential change Web2 made was social. Through collaborative filtering and recommendation, the efficiency of information acquisition was improved enormously, and some Web1 products were socialized.

In the Web3 space, we’ve got excellent directory-based e-commerce and transaction infrastructures, such as OpenSea and Uniswap; we’ve got search infrastructures, such as Etherscan and tens of millions of pioneer users who can skillfully use decentralized applications and have accumulated hidden social data.

In the next market cycle, the number of decentralized application users may climb to over a 100 million users. Following the laws of the internet, several decentralized applications with tens of millions of users may emerge. Web3’s user base is not that large at present, as we can see. But it’s time to jockey for position, just as OpenSea and Uniswap did three years ago.

Q:

What makes Web3 social different from Web2? What should we expect mature Web3 social products to look like?

A:

At the beginning of any significant historical changes, it is almost impossible to picture the future clearly. The reason is simple – we are in a fog of uncertainty, and innovation ultimately comes from emergence.

Humans are used to increasing their knowledge of new things by analogy. So, to get a glimpse of the future, they also use an analogy to learn. Entering the mobile internet era, many startups claimed to be a mobile version of so-and-so (product of the PC era). In the end, companies that grew up and existed are new species like Uber or TikTok, which did not exist in the PC era.

As for the social area, community building is more of a growth model. As users need a process to get familiar with new products, it cannot be too large or complex initially and must focus on a critical pain point to provide a competitive solution. The challenge of community-oriented products is that even with the same product features, different teams will get different results; even with the same approaches, different initial users will lead to different results. Therefore, we can only move toward that direction, devote ourselves to practice, perceive feedback rapidly, iterate constantly and update our perceptions, rather than limiting ourselves to one white paper.

The early stage of every significant change brought by technology innovation turned out to be an opportunity for entrepreneurs because they have the ability to iterate their cognition constantly and continuously.

Unfortunately, many startups nowadays have started with the same problems that large companies have, released white papers and road maps at the very beginning of their projects, and got everything planned for the next several years. When looking back, they often found they had taken the wrong paths.

Q:

There have been several projects in the Web3 social segment, but nothing as massive as their contemporaries in DeFi and GameFi. What do you think the core reason is for the current lack of phenomenal projects?

A:

Some tech giants from the internet era use Web2 social products added with some blockchain elements to transform into a Web3 format. We call them “reformists.” Since reformists have to reconcile between Web2 and Web3 interaction scenarios, they may encounter challenges in meeting the conflicted needs of the majority and minority users. Furthermore, the whole new business logic of Web3 products makes it harder to drive radical internal innovation.

Q:

As we all know, the reusability of protocols and components is essential in Web3. Comparatively speaking, is it a more promising path to developing protocols and components?

A:

The current projects in the protocol and component category are modular splits of SNS, including Group, DID, RSS, etc. This idealistic path is faced with the contradiction between theoretical architecture and engineering implementation. From the user side, these modules do not provide enough value.

Why does one need a separate DID? Components that are open sourced to other products need to be tested by large numbers of users. For instance, AWS (Amazon Web Services) was tested by a significant number of users on Amazon before it went to the commercial market. Products and technologies that users have not tested are often not impeccable; thus, they cannot get adopted by developers on a large scale.

Q:

Let’s talk about Bit islands for a bit. What approach does Bit islands take, and what was the logic behind choosing that approach?

A:

The path we chose is revolutionary, which embodies providing a user-oriented whole value experience. The underlying logic of Web3 is self-ownership and more comprehensive interconnection. We reconstruct the underlying layer of social based on the basic logic, search for new interaction scenarios and then design our Web3 social products around those new interaction scenarios.

Therefore, Bit islands provide social products and services for Web3-native interaction scenarios.

Q:

What is the Web3-native interaction scenario?

A:

Many projects claim to be a Discord killer or Twitter killer, but the product features may not entice users to migrate over. In the early innings of the crypto industry, the things that really caught on were brand new. For example, investors didn't move real-world assets into the DeFi space and traded native assets in the crypto field. Uniswap didn't move CEX (centralized exchange) pairs over but allowed anyone to provide liquidity for any crypto asset transaction. Most mainstream NFTs don't digitize artworks in the real world, but are algorithmically generated native artwork.

In the social sector, the way we think about it is, what are the needs that Web2 didn't address very well? What are the needs in Web3 scenarios that Web2 products can't solve? The monetization of creators, the identification, interest aggregation and collaboration based on on-chain activities and assets are all native needs in the crypto world.

It is more than difficult for Web2 products to meet such needs. We have no intention to subvert the existing Web2 products, but to launch a brand-new product based on the new interaction scenarios generated by the crypto world.

We’ve already launched Bi Space, the profile of web3 natives, in this quarter, and will launch Bi Search, a people-oriented Web3 search engine, in later September. Furthermore, Bi DID, the real ID for Web3 natives, will go live in the next quarter. Every step in the journey of building Web3-native social networking services is designed to meet the native needs of crypto players.

Q:

Social products and platforms in the Web2 era created strong attraction for users through the network effect. How can Web3 overcome this attraction and push users to leave Web2?

A:

The network effect exists for sure, and it's the core foundation for providing value to users. In a decentralized architecture, data is owned by users and migratable as well. Without disobeying the network effect, users could customize front-end interactions, which is impossible in the Web2 era because platforms control your data and thus your freedom. Theoretically, Web3 social networks can be more interconnected than Web2.

In the broad framework, social is divided into two categories: acquaintance interaction and interaction based on users' interests. Typically, initial social networking should be for acquaintance interaction, which is communication products. The core problem of Web3 is that the total number of crypto natives is too small. Thus, too early for products focusing on acquaintance interaction. As for interaction based on users' interests, it's useless to simply copy and migrate social relationships from other platforms, but only to create new relationships in new interaction scenarios.

With Web3 infrastructures developing and improving, the scale of the new social network will expand constantly, triggering the social black hole effect and gradually encroaching on Web2 social networks. Nevertheless, we still need to remain cautiously optimistic, because this is probably something that will only happen five to 10 years later.

Q:

The narrative of Web3 says that the Web2 platforms monopolized the users' data and made a lot of revenue from it. At the same time, Web3 returned the data to the users so that ordinary users can get revenue from their data. Is this concept valid?

A:

The key is that the threshold for users to monetize will be significantly lower. The monetization of user data is one of the core scenarios we focus on. We’ll make toolkits available for everyone, even though most people are customers and payers. Just like the rise of social media, which makes everyone become the disseminator of information and the flow rate of information increased unprecedentedly, the dramatic lowering of the data monetization threshold will also help increase data exchange dramatically.

In addition, although the data service targets of ordinary users are mainly themselves, the transformation of Web3 business model enables them to participate in the eco construction and to earn revenue through contributing.

Q:

Another narrative of Web3 says that users can migrate with their data, thus breaking the platforms’ monopoly of data and solving the problem of data silos. But in the world of blockchains, there are many isolated public chains, and dapps scattered on different chains. Will Web3 truly break the data silos?

A:

Data in Web3 era differs fundamentally from it in Web2 since it’s integratable and migratable. In our plans, Bit islands will alter the situation of data fragmentation in Web3 by improving the infrastructures. We will connect, copy and cross-certificate users’ interaction and reputation data on different chains. Users' on-chain assets cannot be copied, while historical interaction data and on-chain reputation can.

Q:

In the crypto space, it seems that the token incentive strategy is indispensable for projects attracting certain users. Is token incentive one of the core logics of Web3 innovation?

A:

The two phenomenal Web3 dapps that acquired large scales of users – Axie Infinity and StepN – were sought-after for a while and then soon suffered heavy blow. The DeFi (decentralized-finance) apps which were spawned by tokenomics also collapsed completely in the continued market recession.

Meanwhile, apps like MetaMask and Uniswap, which created enormous value for their users, were able to thrive without tokens or lacking token value capture. So the key to making any mechanism work in the long run is what value is created. Simple financial games won’t be sustainable.

After naming Web3 social as SocialFi, most people tended to focus on the finance and X2Earn model. Our approach is to explore the intrinsic value Social can bring and generate an external economy based on that.

Q:

Last question, what is the vision of Bit islands?

A:

Our goal is to become the largest Web3-native application in terms of user size, to establish complete and systematic Web3 social networking services, to open gradually to developers after large-scale user verification and iteration and to become an indispensable infrastructure of Web3.

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