Back in December 2019, Jack Dorsey, the founder and CEO of Twitter and payments operator Square, announced a new team dubbed Bluesky, to work on decentralized social media standards. The news has gotten both the crypto and noncrypto communities abuzz — and for good reason.

Mr. Dorsey has not only spoken in favor of decentralized protocols but (as proven by his work at Square) has committed resources trying to get there. Advocates and thought leaders of Web 3.0 such as Vitalik Buterin, Fred Wilson and Brian Armstrong have applauded this decision as a signal of open protocol acceptance. While it’s too early to tell what Bluesky will end up becoming, there is one group who may find this declaration pequliar: Twitter’s shareholders.

Twitter Inc.’s core business model is rent-seeking in nature, taking advantage of the company’s aggregated data and access to attention. This is no secret, and has been a fair trade for users who enjoy an easy interface from a large, secure network. But the model has a downside, as Dorsey himself stated:

“Centralized enforcement of global policy to address abuse and misleading information is unlikely to scale.” “[Attention-directing] algorithms are typically proprietary, and one can’t choose or build alternatives.” “Existing social media incentives frequently lead to attention being focused on content and conversation that sparks controversy.”

Decentralized protocols can solve this type of misalignment by economically incentivizing participants to create fair rules, manage engagement, and prioritize network stability. That’s why millions of people have flocked to decentralized platforms like Bitcoin and Ethereum. Twitter’s business model on the other hand, like all centralized social platforms, is built on the opposite principle. Decentralized control and a centralized business model cannot coexist.

Take the issue of fake activity via bots, multiple identities and click farms. Although they diminish user experience and platform integrity, social media services such as Facebook and Twitter are economically incentivized to let them be, as they help juice usership numbers sold to advertisers. It’s no accident that Facebook has previously sold ad space for 10 million more U.S. millennials than exist.

Since advertising is based on clicks and pageviews, cutting down on fake traffic means less profits. Regardless of his personal beliefs, Dorsey has a legal responsibility to his shareholders to maximize profits. A quick scan of Twitter’s periodic letter to shareholders reveals how: by upping the share of “daily active users.” Twitter’s incentive is to remove just enough bots to ensure user experience without wholly solving the problem. And his users end up with a platform that maximizes the quantity of attention over quality of content.

What has Dorsey endorsed?

Can a protocol become a platform, in the way Dorsey has endorsed? Yes, but not without total realignment. Surrendering centralized control of Twitter to a decentralized protocol would mean the end of its current monetization strategy. Failing to do so would cost Bluesky its network effects and relevancy. This is where Dorsey is trying to have his cake and eat it too.

By highlighting the flaws of centralized social media, Dorsey is nullifying Twitter’s long-term business model, the one investors invested in. And by suggesting that Twitter is merely a client of Bluesky, a new team may not succeed, considering the significance of Twitter’s current massive network and access to data.

This tension is not an accident of history, but a direct result of a model that separates owners, users and management into distinct groups with different incentives. Unlike a decentralized protocol, Twitter’s shareholders are not its contributors. Blackrock isn’t writing clever one-liners, nor is Vanguard tweeting out dank memes. They are simply investors in a company that monetizes user data via targeted ads. Twitter took their capital and has an obligation to deliver. As Dorsey states:

“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 reasoning on why decentralization is good for humanity rings true. Shareholders should be concerned by that fact, while others may be excited. It’s becoming generally accepted that today’s social media models are not sustainable, further evidenced by the positive reaction to Facebook co-founder Chris Hughes’ argument that Facebook should be broken up. But there too, shareholders should take notice, as any solution to this problem — be it decentralization or anti-trust action — impacts the status quo of these social media models. Regardless, it may be tough for Dorsey to convince shareholders that anything that will “force [Twitter] to be far more innovative” is worth funding.

Bluesky is not Libra, Square crypto is

When Facebook entered full-force into the crypto payments space in early 2019 with Libra, it aimed to disrupt payments — not itself. Dorsey has been attempting the same (quite successfully) through Square Crypto, and while Libra has smart contract capabilities, it doesn’t find purpose in decentralizing Facebook’s algorithms.

There is nothing wrong with profits, and even decentralized protocols enjoy monetization strategies. At odds in this debate is how central the means of monetization are to the success of the network as a whole. The current ad-supported and content-creator-uncompensated model of social media inevitably leads to the worst kinds of content rising to the top. Outrage brings attention, and attention brings ad revenue. The result is “centralized” newspapers leading with gruesome headlines, and Twitter and Facebook hesitating to crack down on outrageous content.

To be fair, decentralization has its own tradeoffs, and there are good reasons why no such platforms or protocols exist today. Dorsey and the founders of other centralized social media platforms deserve credit for getting things to this point. But we shouldn’t fool ourselves into thinking that their pivoting to a decentralized model is a simple switch. It cannot happen without great sacrifice.

Related: User Retention: The Holy Grail for DApps Moving Beyond Buzzword Status

While it’s too early to tell what Bluesky will end up looking like and what purpose it will serve in the context of Twitter, Dorsey’s declaration is a seminal moment for Web 3.0. Furthermore, years of trial and error have proven that decentralized social media has serious obstacles, such as the friction it poses for users and the lack of network effects. Both problems could be overcome if Twitter were to unleash its millions of users and their data onto a decentralized protocol designed by Bluesky. But the company’s shareholders might have something to say about that.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article was co-authored by Omid Malekan.

Nir Kabessa is the co-founder of Yup.io and the president of Blockchain at Columbia. Currently a senior undergraduate student at Columbia University, Nir spent his academic years deep in the distributed ledger space serving as a teacher’s assistant for blockchain courses at Columbia and contributing to articles on Forbes, BigThink, Benzinga, Hackernoon and more.