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Pacmoon Almost Solved Crypto’s SocialFi Problem—Then Elon Musk Crushed It

0 24

For years, countless crypto startups have tried—and failed—to get one innovation right: a sustainable, on-chain system for financially incentivizing online behavior (browsing social media, reading articles, watching videos) that rewards creators and consumers alike.

The concept, dubbed SocialFi, speaks to the heart of what crypto once promised: an escape from the iron grip of billionaire tech elites who monetize your every online move, and a means to recapture that wealth for the many.

Last month, a Blast meme coin community called Pacmoon (PAC) debuted what appeared to be a novel solution to crypto’s SocialFi problem. For a few weeks, the system, Pacmoon v2, soared: members of the PAC community began accumulating tokens with real monetary value in exchange for simple engagement on Twitter that, crucially, appeared to reward quality content and box out spammy token farmers and automated bots.

The future, for Pacmoon and for crypto, looked bright. Then, last week, Elon Musk’s Twitter abruptly moved to make user “likes” data private—crippling Pacmoon’s nascent SocialFi scheme in an instant, and laying bare crypto’s continued dependence on the very tech billionaires it seeks to free us from.

Pacmoon v2

Pacmoon was started earlier this year by a crypto trader and two friends who sought to create the first dominant meme coin on Blast—a new Ethereum layer-2 scaling network from the creators of Blur, the disruptive, incentivized NFT marketplace.

From the beginning, “Bobby Big Yield,” Pacmoon’s pseudonymous founder, knew he needed to make PAC multifaceted if it was going to succeed. It couldn’t just be a meme coin, so many of which fade away with the next news cycle—it had to be a “community coin,” designed to operate as a social home base for Blast’s lucrative, finance-focused user base.

If Bobby could find a way to incorporate SocialFi features into PAC, he figured, the token would never fade from relevance. It would serve as the backbone of a self-perpetuating ecosystem in which Blast users got rewarded to engage with each other.

But the trader was under no illusions about SocialFi. He’d seen countless crypto projects amass activity with flashy promises of rewarding social media behavior, then collapse after forward momentum slowed.

“Going viral once, getting a bunch of people to use your product, is not that hard for any decent crypto marketer and competent product team,” Bobby told Decrypt. “What’s hard is to get people to do it twice.”

So Bobby and his colleagues devised a novel SocialFi solution, one they dubbed “social validation.” Borrowing inspiration from the structure of proof-of-stake networks like Ethereum— which rely on independent validators who have significant financial “stake” in the network to authenticate transactions—Pacmoon would tap the token’s biggest holders to curate community Twitter behavior and reward quality posts.

The logic behind empowering “social validators” was the same relied on by countless blockchain networks. Pacmoon validators (those holding 10,000 PAC or more; $2,300 worth at peak price) would naturally be invested in boosting the value of their own tokens, and thus the long-term success of the Pacmoon brand, by curating quality social media content—not the countless “BUY TOKEN NOW” posts that flood most Crypto Twitter timelines.

If Pacmoon validators got sent PAC for liking Pacmoon-related tweets, and the authors of those tweets got rewarded in PAC too, Bobby figured the system would unlock a stream of genuinely engaging social media content that would bring the Pacmoon community closer together and keep PAC relevant in perpetuity.

When Pacmoon v2—the version debuting “social validators”—launched in late May, Bobby’s thesis was largely proven right. Pacmoon holders loved the innovation, and immediately went to work creating elaborate artworks, raps, and animations to garner likes from the roughly 1,600 Pacmoon whales who signed up to become validators.

Even Beeple, the world-renowned digital artist behind the most expensive NFT ever sold, jumped on the bandwagon.

PACMOONIANS ENJOYING A GOLDEN SHOWER ✨ pic.twitter.com/DCFCtoeRPB

— beeple (@beeple) June 3, 2024

Ovie Faruq (aka OSF), a crypto influencer with over 195,000 Twitter followers who signed up to become one of Pacmoon’s first social validators, told Decrypt shortly after the debut of v2 that he particularly liked how the system relied on Twitter likes—not reposts or any other form of active promotion that could dilute his brand or legitimacy.

“For accounts with larger followings, you don’t want to be shilling,” Faruq said at the time. “Now I can still engage with it, but do it passively.”

He also added that the system encouraged him to organically engage with Pacmoon-related content as he would ordinarily—increasing the net quality of the Pacmoon ecosystem, and potentially offering a glimpse of a SocialFi model finally fit to gain long-term traction.

“I think that’s the first time I’ve seen anything like this,” Faruq said. “It’s a model that I think any brand new crypto project starting out could definitely use.”

Bobby, meanwhile, was blown away by Pacmoon v2’s success. Pacmoon holders were creating real social bonds; the system facilitating those bonds was spreading the Pacmoon brand across Twitter, for free; and all the while, PAC was pumping towards all-time highs.

“We’re creating an almost infinitely higher number of connections between members of our communities,” Bobby said at the end of May. “And this advertising… we can’t pay for it.”

Less than two weeks later, it all fell apart.

Pivot to v3

On June 12, Elon Musk announced that Twitter had made all likes on the platform private, apparently in the name of user privacy.

Based on how Pacmoon collected data, the policy change immediately derailed Pacmoon v2. Unless Bobby and his team wanted to pay for exorbitantly expensive access to Twitter’s enterprise API platform—something they say they couldn’t afford—their “social validation” experiment was kaput.

Important change: your likes are now private https://t.co/acUL8HqjUJ

— Elon Musk (@elonmusk) June 12, 2024

As soon as they saw the post, Bobby and his fellow Pacmoon builders faced hard questions. Chief among them: Was their ultimate goal really cracking crypto’s SocialFi problem, even in the face of obstacles lobbed by one of the world’s richest men? Or were they just here to make a fun meme coin?

They chose the latter answer. Pacmoon v2 was halted; the team worked furiously to cook up a new path forward less dependent on SocialFi. The price of PAC immediately collapsed by over 50%. At writing, it’s sunk to roughly $.07.

“It sucks to say ‘Well, we have to scale it back,’” Bobby recently said. “At least for now, it makes the most sense for us to focus on creating fun content and making sure everybody has a good experience, with the financial incentives more as just a fun cherry on top.”

Pacmoon v3 launched on Wednesday. Effectively, Pacmoon validators no longer validate. The job of curating community content has fallen back on the official Pacmoon Twitter account, which retweets 100-odd top posts of the day. Those chosen posters earn PAC, as do Pacmoon validators, so long as they like any one Pacmoon-related tweet on a daily basis.

Pacmoon v3 is undeniably more centralized—and less democratic—than v2 was.

Pacmoon V3 is now live!

Create content and like tweets to earn $PAC

How it works 👇 pic.twitter.com/jp2tGrd71k

— PACMOON (@pacmoon_) June 19, 2024

Bobby insists that v2 wasn’t perfect to begin with. He says that the job of weeding out nefarious token farming among Pacmoon validators was becoming cumbersome and costly to his small team, and that playing the role of policeman was threatening Pacmoon’s feel-good “vibes.” He maintains the transition was for the best.

But he nonetheless believes that he stumbled across something crucial in innovating the concept of “social validators.” Perhaps a piece of a future SocialFi system that can really, finally work—maybe if harnessed by a large enough platform with enough resources to build it out, then let it soar.

A fight for another day, then, to be waged by someone with a lot more power than Bobby.

That’s the grim irony of crypto’s enduring SocialFi dilemma. Even if tech arises capable of propelling an incentivized social media engagement cycle forward in perpetuity, it currently must depend on hyper-centralized platforms like Twitter, which are popular enough to meet people where they are.

Decentralized social media alternatives like Farcaster do exist. But they have a long, long way to go before they grow big enough to fuse with tools like Pacmoon v2 and unlock SocialFi’s futuristic potential.

Just a few weeks ago, Bobby thought that future was here. Now, he’s feeling a lot less optimistic.

“I’m kind of realizing, to be honest, decentralized social media is actually very, very hard to do right,” Bobby said this week. “I think it’s virtually impossible to get it right now.”

Edited by Andrew Hayward

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