What Can Twitter’s Decentralized Initiative Mean?

Back in December last year the founder and CEO of Twitter and payments operator Square, Jack Dorsey, published a series of tweets, announcing a new team named Bluesky, which will be tasked with developing decentralized social media standards. The news have awoken vigorous interest in both the crypto and non-crypto communtites — and for good reason.

Mr. Dorsey has not only expressed his support of decentralized protocols, but (as it can be seen from his work at Square) also committed resources to their development. Web 3.0 enthusiasts and influencers, such as Vitalik Buterin, Fred Wilson and Brian Armstrong have cheered the decision as a sign of open protocol recognition. Though the future of Bluesky is somewhat foggy, there are people who may regard the decision as strange one: Twitter’s shareholders.

Twitter Inc. is set for seeking rent, reaping benefits from the data accumulated by the company and access to attention. It is a well-known fact, and can be regarded as fair trade for users who appreciate simple, intuitive interface from a wide, secure network. But, Dorsey recognized that this model has a drawback:

1. “Centralized enforcement of global policy to address abuse and misleading information is unlikely to scale.”

2. “[Attention-directing] algorithms are typically proprietary, and one can’t choose or build alternatives.”

3. “Existing social media incentives frequently lead to attention being focused on content and conversation that sparks controversy.”

Decentralized protocols can resolve al these issues, as they can economically reward those who devise fair rules, are engaged in management or network stability prioretization. These are the reasons why people moved to decentralized platforms such as Bitcoin or Ethereum. In contrast, Twitter’s business model is based on a completely opposite principle. There is no consent between decentralized control Twitter currently employs and a centralized business.

Consider the problem of sham activity with bots, different identities and click farms. Although they undermine user experience and platform integrity, social media, such as Facebook and Twitter often are economically motivated to maintain their presence, as their user quantities are a candy for advertisers. It’s no surprise, that Facebook has recently sold ad space for 10 million nonexistent millenials.

As advertising is tied to clicks and pageviews, reducing sham traffic means dropping profits. Regardless of his personal beliefs, Dorsey is legally responsible for bringing maximum profits to his shareholders. If we flick through Twitter’s periodic letter to shareholders, we will see how: by upping the share of “daily active users.” This way Twitter will keep the number of bots low enough, so they do not hamper user experience, but high enough to keep profits on the appropriate level. Such state of affairs may lead to the prevalence of quantity of attention over quality of content.

So, what Dorsey endorses?

Can a protocol evolve to a platform, as Dorsey has endorsed? Yes, but not without total overhaul. Giving up centralized control of Twitter in favour of a decentralized protocol would put an end to its existing monetization strategy. Failure will cost Bluesky its network efforts and relevalncy. This is where Dorsey tries to hold all the cards.

By pointing out the drawbacks of centralized social media, Dorsey undercuts Twitter’s established business model, in which investors once invested. And by presenting Twitter as cilent of Bluesky, a new team may not succeed, minding the significance of Twitter’s current massive network and access to data.

This friction is not an accident, but a consequence of a model that separates owners, users and management into distinct groups with different motivation. Unlike decentralized protocol, Twitter’s shareholders are not its contributors. Blackrock isn’t writing witty one-liners, nor is Vanguard tweeting out dank memes. They are merely investors in the company which monetizes data with targeted advertising. Twitter took their funds with an obligation to deliver. Dorsey maintains:

“Why is this good for Twitter? It will allow us to access and contribute to a much larger corpus of public conversation, focus our efforts on building open recommendation algorithms which promote healthy conversation, and will force us to be far more innovative than in the past.”

Dorsey’s opinion about the benefits of decentralization for humankind is true to life. Some shareholders may be alarmed by it, while other may be excited. It’s becoming generally accepted, that models on which social media are built, are outdated. It is clearly seen from the positive reaction to Facebook’s co-founder Chris Hughes statement, that it is time to break up Facebook. But here shareholders should also be attentive, as any solution to the problem, be it decentralization or anti-trust action, impacts the status quo of these social media models. Anyway, it may be difficult for Dorsey to assure shareholders that anything that can “force [Twitter] to be far more innovative” deserves funding.

Bluesky is not Libra, Square crypto is

When Facebook opened the full-fledged crypto payments at the beginning of 2019 with Libra, it tried to decentralize payments — not itself. Dorsey has been trying to do the same (in which he succeeded) with Square Crypto, and while Libra has smart contract capabilities, it does not influence Facebook in terms of decentralization.

There is nothing bad in profits, as decentralized protocols employ monetization as well. The issue is how various monetization strategies will impact the success of the network as a whole. The current ad-supported social media model, which does not take content creators into consideration, promotes and endorses the worst content. Anger brings attention, and attention brings profits. As a result, we have ”centralized” newspapers flooded with dire headlines, and Twitter and Facebook do not eradicate the outrageous content.

Frankly speaking, decentralization also has its flaws, and there are serious reasons why such platforms or protocols still do not exist. Dorsey and the founders of other centralized media are to be praised for understanding this. But we should not be deluded, that their attention to decentralized model is a simple switch. It can not happen without sacrificing something.

As it is too early to draw definite conclusions about the future of Bluesky, Dorsey’s statement is a watershed for Web 3.0. Moreover, years of trial and error have shown that decentralized media has its own stumbling blocks, like the friction it poses for users and the lack of network effects. Both problems could be diminished if Twitter moved its millions of users onto a decentralized protocol developed by Bluesky. But the company’s shareholders will find objections anyway.