Why Social Capital is the True Currency of Web3

Sybil attacks and mercenary capital plague token-based governance, turning DAOs into ghost towns. Protocols like Uniswap and Arbitrum have airdropped billions to wallets that immediately dump tokens.

• Low voter turnout (<5% common) and high sell pressure post-airdrop.
• Soulbound Tokens (SBTs) and Gitcoin Passport attempt to solve for unique humanity.

Protocols like Farcaster, Lens Protocol, and Galxe are building on-chain social graphs where influence is a composable asset. This enables contextual airdrops and reputation-weighted governance.

• Ethereum Attestation Service (EAS) allows any entity to issue verifiable credentials.
• ERC-6551 turns NFTs into token-bound accounts, enabling reputation to accrue to a portable identity.

Projects like friend.tech, Blur, and EigenLayer have perfected the art of converting user activity into quantifiable, tradable social capital. This creates a direct feedback loop between contribution and reward.

• Points act as a non-transferable, pre-token reputation score.
• Key sales and restaking explicitly price attention and trust.

The tech stack for social capital requires resilient data layers and open algorithms. Lens Protocol (social graph), Farcaster (decentralized client), and Orbis (contextual data) separate application from infrastructure.

• Storage: Arweave and IPFS for permanent, censorship-resistant data.
• Indexing: The Graph for querying complex social interactions.

Effective social capital systems must punish short-term extraction and reward long-term alignment. Vesting schedules, reputation decay, and quadratic voting are mechanisms to achieve this.

• Vitalik's "Soulbound" paper outlines non-transferable tokens for credentials.
• Optimism's RetroPGF distributes $40M+ based on community-nominated impact.

As AI agents proliferate, on-chain social capital becomes the trust layer for machine-to-machine interaction. An agent's reputation score, built via EAS attestations and transaction history, will be its primary collateral.

• AI Agents will need verifiable credentials to access DeFi and social protocols.
• Projects like Fetch.ai and Autonolas are building the foundational agent frameworks.

Decouples identity (on-chain) from applications (off-chain), creating a competitive marketplace for clients like Warpcast. Monetization is indirect via ecosystem growth.

• Key Benefit: User-owned data prevents platform lock-in, enabling ~3M+ users to migrate clients without losing their graph.
• Key Benefit: Frames and Actions turn posts into interactive, on-chain commerce endpoints, driving $50M+ in transaction volume.

Treats social connections (follows, mirrors, collects) as composable, ownable NFTs. Monetization is baked into every interaction.

• Key Benefit: Collect modules let creators monetize any post directly, with fees programmable via smart contracts.
• Key Benefit: The open graph acts as a primitive for 500+ apps, from social feeds to recommendation engines built on shared data.

Web2 platforms like X and Facebook hoard user graphs to sell ads, creating $100B+ walled gardens. Users generate value but capture none.

• Consequence: Innovation is stifled; no app can build on your Twitter follower list.
• Consequence: Platform risk is existential; a ban erases your social capital and livelihood.

On-chain social graphs turn influence into a verifiable, financial asset. This enables new economic models beyond advertising.

• Mechanism: Social DeFi uses follower graphs as collateral or for underwriting (e.g., lending, insurance).
• Mechanism: Creator DAOs form around shared audiences, with revenue splits automated via the protocol.

Radicalizes the model by directly tokenizing social access via bonding curves. It's a pure, volatile market for attention.

• Key Benefit: Creators capture 100% of fees from key trades, generating $50M+ in creator revenue in months.
• Key Drawback: Highlights the tension between financial speculation and sustainable community building.

Long-term value accrues to base-layer protocols (Farcaster, Lens), not flash-in-the-pan apps. The graph is the moat.

• Prediction: The most valuable company in Web3 social won't be an app; it will be the protocol that secures the graph.
• Prediction: Sustainable monetization will blend micro-transactions, premium features, and DeFi integrations.

Traditional tokenomics create mercenary capital. Users chase yield, not protocol health, leading to volatile TVL and governance attacks.

• Key Benefit 1: Social capital (reputation, engagement) creates stickier, long-term users.
• Key Benefit 2: Aligns incentives for sustainable growth, not short-term extraction.

Pioneered by protocols like Aave's Lens and EigenLayer, social graphs and on-chain history enable underwriting without traditional capital.

• Key Benefit 1: Unlocks permissionless credit based on verifiable history.
• Key Benefit 2: Reduces systemic risk by collateralizing reputation, not just volatile assets.

Forget TVL. Measure liquidity depth held by long-term holders (e.g., Uniswap's v3 concentrated positions, Curve's vote-locked CRV).

• Key Benefit 1: Predictable, protocol-aligned liquidity reduces fragility during market stress.
• Key Benefit 2: Creates a defensible moat; this liquidity cannot be easily forked or drained.

Invest in the rails that mint and trade social capital: Lens Protocol, Farcaster, CyberConnect. These are the Stripe for Web3 identity.

• Key Benefit 1: Capture the data layer for the next billion users.
• Key Benefit 2: Enable new app categories (social DeFi, reputation-based airdrops) on a shared social graph.

Evaluate governance quality, not just GitHub commits. A DAO's social capital is its execution risk.

• Key Benefit 1: High voter turnout & low proposal failure rates signal a functional, aligned community.
• Key Benefit 2: Avoids governance capture and protocol stagnation, protecting your equity.

The ultimate defensibility isn't code; it's a high-agency community that co-builds. See Nouns DAO and Friend.tech's key model.

• Key Benefit 1: Community becomes the R&D and growth department.
• Key Benefit 2: Creates a cultural moat and organic distribution that capital alone cannot buy.