Blockchain consumer apps: Next-generation social networks (aka strategic advice for Facebook)

Blockchain is emerging as one of the key enabling technologies of the 21st century. Distributed ledgers are starting to be recognized as the technology underlying cryptocurrencies, and as a next-generation enterprise and government software. However, deploying the possibilities of blockchain in the consumer space is a relatively untouched opportunity since decentralized social network projects have not gotten a lot of traction and existing social network platforms have not yet stepped into the blockchain space. Defining Consumer Blockchain business models could be the next development in the evolving Blockchain Economy.

Why did Facebook make a Blockchain announcement in May 2018?

Facebook received global attention on May 8, 2018 by making an announcement to start a small blockchain group. There could be three reasons for the announcement: 1) to counter recent bad publicity with a forward-looking statement, 2) to explore a better digital payments solution, and 3) (if really visionary) to propose and execute the next-generation of social networking applications. Facebook and other social network companies are limited by the dynamics of their business, which is governed by saturation (user attrition) and stickiness (user engagement). The issue is that the “acquire subscribers” business model is not extensible. Once subscriber growth saturates, users will only use the platform so much before moving on to another property. The challenge faced by social networking companies is to offer “new widgets” to users to continue their engagement on the platform. Blockchain offers the possibility of defining the next level of value-added apps to keep users engaged, in particular, by approaching individuals as full persons, not just as “liking” agents and buying agents.

Facebook could likely be worried about the all too obvious problem of user numbers flattening, saturating, and declining, starting in the US market, as indicated in Figure 1.

Figure 1. Facebook Monthly Active Users worldwide as of December 2017. Source:

The Facebook blockchain announcement (May 8, 2018) might be explained by timing alone. The public announcement came just after the company’s annual developer conference in San Jose California (May 1-2, 2018). The news could have been addressing the need to have a large-magnitude ‘Steve Jobs’ type announcement to get programmers motivated about the future of the company. It was also at the same time as the big annual blockchain conference in New York, Consensus (May 14-16, 2018), where many companies make blockchain announcements. Most pointedly, however, Facebook had been receiving ongoing negative publicity from the March 17, 2018 announcement that 50 million Facebook profiles had been harvested for Cambridge Analytica, in a major data breach, for the propagation of “fake news” related to the US presidential election. A visionary announcement was necessary as an attempt to bolster brand equity.

More strategically for Facebook, the company needs a digital payments solution that works. Therefore, having a blockchain solution for payments could be explored. Facebook has had a payments solution included in its Messenger platform for years, but it has never been widely adopted. Consumer-to-consumer payments in the US have been driven by PayPal, Venmo, Square, Apple Pay, Google Pay, and Zelle. In contrast, other worldwide social networks have dominated the digital payments market. In China, apps include Alipay, WeChat Pay, and Tencent, which Accenture estimates will have relocated 30% of bank revenue by 2020. China is well on its way to being a cashless society with $5.5 trillion of digital payments in 2016, and over $10 trillion estimated in 2018. 50% of mutual funds are sold online in China. China has 50x the US in mobile payments and 6x the population. The advance could be due to the fact that mobile payments are more trusted in China (55% in China vs. 19% in the US). India too (due to surpass China in population in 2022) is a leader in digital payments and innovative cashless solutions.

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Social networking companies in other countries have leap-frogged to the forefront with digital payments solutions because these countries did not have such a large credit-debit card presence or other alternatives to cash. The result is that these social networking companies are already poised to launch additional business lines to social network and digital payments customers that Facebook is not.

Why Facebook and social networks could benefit from Blockchain Consumer Apps

Since users saturate in social networks, the future of social networking is at stake, and it is strategically crucial to extend the business, for example by launching value-added services as an overlay to social networks. New business lines would be logical extensions to the core social networking business, as opposed to white elephant plays such as the Oculus (purchased by Facebook in 2014 for $2 billion). Arguably, the Oculus Rift was an attempt at next-generation value-added services on social networking platforms, with the idea that users would like to share experiences. However, the attempt failed for a variety of reasons.

Although blockchain enthusiasts tout the possibility of freeing social network-type applications from monopolistic platform giants such as Facebook, in reality so far it has been difficult to garner the requisite traction and liquidity in decentralized social networking platforms. Decentralized projects such as Steemit, Yours, and Holochain (decentralized social network/Reddit), LaZooz (decentralized Uber), Ethlance (decentralized eLance), and Filecoin and Storj (decentralized Dropbox) have not yet seen substantial success. These new models are an important advance and it would be too early to call them a failure, however bootstrapping users onto the platform is a clear challenge. Instead, existing social networking platforms, who must innovate to outstrip user shrinkage, could draw upon their large consumer bases to offer the next generation of value-added services using blockchain to protect and validate user data and provide remuneration.

Next-generation value-added Services and Apps on Social Networking Platforms

The first idea is to create a local economy on the social networking platform, for example with FacebookCoin and the Facebook Wallet App. In the Facebook Economy, user likes are validated, compensated, and connected to advertising revenue, new product offerings, and vendor proposals. The platform shares rather than monopolizes the revenue streams, transitioning to more of an App Store business model. Initial Coin Offerings (ICOs) are a financing advance over IPOs and Kickstarter that pre-sell access to a crypto-project platform and token. The next phase could be using blockchain models to surface and pre-commit customer demand for a product or service using the liquidity of a social networking platform. Blockchain-based contracts could attest to customer demand for a potential product or service, and financing might be obtained on the basis of securitized customer demand. Likewise, vendors could make Groupon-type (e.g. volume-based) offerings to customers, committed with blockchain escrows and payment channels.

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The second idea is to use consumer blockchains for the secure transfer of validated information, with payment.Blockchain Consumer Apps could unlock the next tier of information the user has, not just likes, but validated opinions, e.g. unique person-based non-fake opinions in the form of validated and compensated opinions, referrals, and recommendations. The premise is that consumers would be willing to share more high-value information if it were kept private and compensated. Blockchain provides a user-authentication method that keeps identity private yet confirms real-life identity.

Blockchain has precisely the properties to define the next generation of social networking applications: data privacy and payments. Definitionally, blockchain is software for the secure and private transfer of information, money, property, legal agreements, and identity confirmation, globally, in real-time, on demand, over the internet. This is crucial enabling functionality for value-added apps to be built on top of large, global, liquid social networking platforms. Blockchain is the information security and payments layer the internet never had. Theopportunity is to explore business models around these properties to define the Consumer Blockchain business model.

Consumer Blockchain Apps using Data Privacy and Payments

The next generation of consumer apps could be those in which data privacy and remuneration is important, for example, in the areas of “non-fakeness,” personal finance, health, and employment.

  • Validated Reviews: Validated reviews, recommendations, and referrals, with compensation and feedback on the referrals (“Yelp on Blockchain”)
  • Digital Health Wallet: consolidating self and family digital identity, payment, insurance, and EMR (electronic medical record) information in one place. The digital health wallet can also include links to pharmacy, health social networks, and doctor referral.
  • Personal Data Security Services: cyberprotection, cloud storage, data backup, password management, coordination across devices, connected car security
  • Credit Services: credit rating, notification, and permissioning, security audit, bureaus
  • Personal Investment Services: mutual funds, financial planning, secure documents, medical directives, trading, cash management
  • Personal Finance: p2p loans (blockchain-based “eBay for Money”)
  • Consumer Banking: bank account as a payment channel linking direct deposit inflows with autopay outflows (“Chase on Facebook”)
  • Employment: job postings, referrals, application, validated resumes (education, employment history confirmed via QR code)
  • Certification: job skill training and certification for Digital Economy technologies (blockchain, data science, AI, IOT, cybersecurity, cloud computing) (“Coursera on Facebook”); professional development smart contracts (“Maslow smart contract on Facebook”)
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Consumer Blockchain Apps and business models could be the next development in the Blockchain Economy. Blockchain could spur applications in both enterprise and consumer markets. For organizations, blockchain is a next-generation information technology that facilitates shared business processes, integrated ledger record-keeping, and secure automation.

For consumers, some of the important blockchain properties are data privacy and payments. The claim is that individuals would be willing to share more information if it were kept private and remunerated. This could lead to a new tier of applications running as an overlay to social networks, unlocking additional consumer value. The idea is extending “likes” to validated (i.e. not fake) opinions, recommendations, and referrals, supported by micropayments, for example, in the areas of personal finance, health, and jobs.

Blockchain Consumer Apps could be a crucial strategic advance for social networking platforms which are governed by the dynamics of saturation and stickiness. The first challenge for social networks is to deliver a new tier of value-added services. The second and more important challenge is to redefine the concept of social networks by providing a higher-level value proposition that understands users as full persons with a variety of goals and aspirations, not merely as purchasing agents.

Picture from Pexels.

Melanie Swan is the Founder of the Institute for Blockchain Studies, a Technology Theorist in the Philosophy Department at Purdue University, and a Singularity University faculty member. Her education includes an MBA in Finance from Wharton at the University of Pennsylvania, an MA in Philosophy from the New School in New York NY, an MA in Contemporary Continental Philosophy from Kingston University London and Université Paris 8, and a BA in French and Economics from Georgetown University. Her primary research interests are Blockchain Economics, Network Theory, and Social Theory.

In pure research, Melanie applies quantitative methods from mathematics, physics, complexity science, and machine learning to blockchains. In applied research, she focuses on payment channels, debt, net-settled capital, risk, integrated business ledgers, and blockchain health economics. Regarding social organization, she has proposed the Smart City Cryptopolis and Blockchain Enlightenment, a social theory of dignity for a multi-species society of human, algorithm, and machine. In applied economics, she has formulated Algorithmic Trust as a social capital network mechanism that moderates credit availability and facilitates blockchain markets to Nash equilibria more quickly than classical markets. Advanced conceptual research focuses on BCI cloudminds, the Brain as a DAC, the biocryptoeconomy, and blocktime (the native time domain of blockchains).


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