Author: BTCLFGTEAM

Aminhossein “Amin” Rad runs an over-the-counter trading desk in Dubai, United Arab Emirates. Searching for a business after dropping out of university, he started to style himself as a Bitcoin broker in 2016. Starting with his first deal after five months of wading through scammers and tire-kickers, Rad went on to found Crypto Desk, a business-to-business exchange that now deals millions of dollars of private crypto transactions among its 2,500 clients every day. 

But why do people use OTC desks when centralized exchanges offer lower fees, and what dangers come with the business? Rad spills the beans on a sector of the crypto world that flies under the radar for most retail traders.

The devil is in the deal-tails

The crypto asset industry has its share of rampant unethical behavior that is encouraged by anonymity and a lack of regulation or enforcement. Having come across all types of scams over his years in the industry, Rad differentiates between what he calls soft scams and hard scams. The former are things such as indirect and impersonal rug-pulls, while the latter are more direct and targeted.

He says most buyers see “shitcoins and memecoins as a joke or a game,” and relatively few experience much emotional trauma when the game ends and prices take a nosedive. However, getting scammed is far from a joke when a serious investor is looking to invest a portion of their hard-earned wealth into the crypto market or cashing out to buy real estate.

“The psychological effects of hard scams are much more deteriorating” in part because they are direct, playing on the mark’s trust rather than greed, and the money is not always an amount that the victim can afford to lose. Rad goes on to explain the common scams.

Third-party scam 

A third-party scam involves a cybercriminal who finds a buyer and seller, introduces themselves as a broker, and offers an attractive deal to both. Rad explains that after building trust and “playing mind games,” the scammer will convince both the buyer and seller to meet in person for the exchange, with perhaps the buyer arriving at the seller’s office with cash. 

Between these transacting parties will be a broker, or, more commonly at least, what appears to be a chain of brokers. The buyer will share their address with the broker, who will instead forward their own address to the seller. The seller then “transfers the coins to the address without thinking twice because the cash is right in front of him, and the coins will arrive in the cybercriminal’s wallet,” Rad explains. With a suitcase of money on the table, chaos will ensue as the BTC fails to arrive.

“Huge volumes of money can disappear in a second — even professional people who get scammed once can sometimes get distracted and lose focus, only to fall victim again.”

Fake crypto coin scam

A fake crypto coin scam involves the scammer sending a different, usually worthless cryptocurrency to the buyer who mistakes it for the real thing. This could be as simple as sending Bitcoin Cash or Ethereum Classic instead of BTC or ETH. Often, it involves the creation of an entirely new token that looks like the real thing when it arrives in the buyer’s MetaMask wallet. This is easily done because “Ethereum is an open platform, and anyone can create any coin they want, like USDTx in place of USDT,” Rad stresses. To be sure, one should check the smart contract — don’t trust, verify.

A variant of this has been seen on NFT marketplace OpenSea, where buyers can bid in Ether or stablecoins USDC or Dai, both of which are worth $1 each. As the Dai symbol can be mistaken for that of Ether’s, an inexperienced or tired user might accept a bid of 79 Dai on their 80-ETH NFT, only to realize too late that they are down by a quarter of a million dollars. While it can be argued whether such a transaction is a scam in the legal sense since there is no direct misrepresentation, those making such offers in bad faith are surely bankrupt in terms of morality.

Transfer recall scam

A transfer recall scam works by way of chargebacks, where a dishonest buyer of a cryptocurrency sends funds to the seller, receives cryptocurrency, and goes on to file a fraudulent complaint with their bank or payment provider, alleging that they themselves have fallen victim to a scam. 

“Some banks immediately return the money,” Rad says. “This is actually one of the most difficult types of scams to follow up on” because neither banks nor the police are likely to understand much about cryptocurrency. 

“Let’s say this case goes to court — you will end up having to pay the government to hire a specialist to make sure that you transferred cryptocurrency to that guy. It is very difficult unless you have powerful lawyers and are willing to spend a lot of money,” Rad describes.

Wallet import scam

A wallet import scam happens when a seller of cryptocurrency says that they cannot send directly to the buyer’s wallet by way of a public address but insists that the Bitcoin must be imported. “They import a watch-only address to your wallet,” Rad says, referring to a setting that allows the wallet to mirror an address it does not control.

“If you are not experienced, you will open your wallet and think, ‘Ooh, I have 100 Bitcoins here in my wallet,’ and you will hand over the cash, but later on, when you try to sell the Bitcoins, you understand that the coins are not transferable.”

In order to pull off this scam successfully, the scammer must generally know which Bitcoin wallet the unwitting buyer is using. “You should never tell anyone what wallet you’re using. It’s none of their business. If the cryptocurrency is sent correctly, it will be received correctly,” Rad warns, using the analogy that you do not need to know whether someone is using an iPhone or Nokia in order to call them. 

Of course, you should never allow anyone to see your seed phrases or private keys or hand them your wallet for any reason, he adds.

In addition to avoiding scams, Rad recommends that anyone conducting OTC trades should take care to obtain and verify the identity of the other party and, regardless of regulations, sign an agreement stating that they have exchanged cryptocurrency and fiat with each other.

The workings of an OTC desk

Now in his mid-20s, Rad was born to a Middle Eastern family and grew up in Dubai, UAE. In 2012, he enrolled in an electrical engineering program at the American University of Sharjah, just north of Dubai. After studying in Sharjah for three years, he was not entirely satisfied with his prospects and dreamed of moving to America, receiving acceptances to continue his electrical engineering studies at both Stanford and the University of Texas at Austin. Despite what would appear to be a solid opportunity, Rad felt a deeper call to start a business back home in the UAE and decided not to move to the United States. He decided to drop out, as he saw no future in engineering.

“I wanted to get into the technology business, but I didn’t know what to start with,” Rad recalls. It was around then that he heard Bitcoin and blockchain being discussed in his friend circles. “I got curious, so I independently went on to learn about this technology — blockchain and decentralization,” he explains.

“There was no example in this region that I could follow — all the blockchain entrepreneurs were in China and the USA. There was no one here who was doing blockchain entrepreneurship.”

Soon he found an opportunity: There was money to be made by brokering Bitcoin deals. Rad started to seek out contacts who were interested in buying or selling cryptocurrency and connecting them. “A lot of them were non-serious, and a lot of them were scammers,” he recalls, adding that filtering serious traders from time-wasters was a drain. Introducing himself as a broker and getting business through word of mouth, he also used online platforms like LocalBitcoins to find business. Often, he would pass referral fees to those introducing new clients.

“It took five months until I made my first deal. For five months, I kept encountering non-serious people and scammers — a lot of scammers.”

Rad explains that the margins on OTC transactions were higher in the early days, with 2%–3% being common in 2016 and 2017. “Now, there are more competitors in the market,” and rates have gone down, while volume has risen. Exact percentages change constantly according to market demand, but “the golden number is half a percent” for high-volume deals, while lower-volume retail traders can expect to pay double or triple. While he describes $1-million and $2-million transactions as common, “anything over $1 million is considered high volume,” Rad says. 

Business was informal at first, and Rad came up with the Crypto Desk name in 2018. The company received a crypto trading license in early 2021, which he says makes the business easier and safer “because we can work in a regulated space instead of a gray one.”

More than margins have changed since the early days. “At the moment, most deals on the OTC market are in USDT,” Amin states, which is a departure from the past when most people looked to buy or sell specific quantities of Bitcoin. USDT is easy to exchange into any cryptocurrency on both centralized and decentralized exchanges or back into fiat. While USDC and Dai appear to be held in higher regard in DeFi and NFT circles, “most people who use USDT are not so familiar with blockchain, and are afraid to change to another stablecoin,” Rad admits. USDT was the first stablecoin, after all. 

As Crypto Desk deals only in UAE dirhams, whose exchange rate has been pegged at 3.6725 dirhams to the U.S. dollar since 1997, exchanging USD stablecoins and AED is a relatively straightforward process with little exchange risk.

“My daily turnover is $4 million–$5 million, but that comes from several different transactions,” Rad clarifies, adding that all of his clients are based in the UAE. He explains that there is a natural balance to the business, with UAE locals tending to be buyers looking to allocate money into the crypto sphere, while those from abroad are most often looking to sell cryptocurrency “in order to purchase real estate, cars, and pay their living expense in the UAE,” Rad explains.

“In my opinion, the UAE will be the center of blockchain in the world.”

In the future, Rad foresees his localized model thriving around the world. Though the market is now controlled largely by big players, Rad believes that “local exchanges have better knowledge of the local market’s needs and regulations.”

So, what about the mythical buyer who is looking for $100 million in cryptocurrency?

“They exist. I can facilitate up to $30 million per day, but I don’t find them,” he says, adding that $4 million–$6 million is the maximum he regularly sees from any single client. When a large order comes in, it falls onto Rad to figure out if the deal is real, a process he says takes only two or three minutes.

“When I see them, I understand: Are they a $100-million person or not?” Rad says with marked confidence. For him, conversation is a better marker of seriousness than appearance. “Most scammers have branded items, and most serious people try to keep a low profile,” he concludes.

Near Protocol (NEAR) has rallied by almost 30% after announcing on April 6 that it had raised $350 million in a funding round led by Tiger Global, a New York-based hedge fund. 

NEAR price eyes 100% price rally

NEAR’s price reached over $19.75, just about 2.5% below its all-time high. However, many analysts agreed with the potential for the NEAR/USD pair to reclaim its best level to date, and even rise above it in the coming weeks.

Adoption remained the key focus behind the bullish predictions. For instance, Zoran Cole, the founder of the popular Telegram group Crypto Insiders highlighted that Near Protocol will announce the launch of its own native algorithmic stablecoin called USN as early as April 20.

The stablecoin will reportedly use a Terra-like native token burn mechanism to maintain the U.S. dollar peg, effectively reducing NEAR supply.

Additionally, as Cole asserted in his investment thesis, Near will offer stakers an annual percentage yield of around 20%, thus incentivizing DeFi capital rotation toward its pools and boosting NEAR’s demand simultaneously.

2/ $USN by @NEARProtocol : https://t.co/kHNqXVuTSJ

— Do Kwon (@stablekwon) April 8, 2022

“This will lead to a comparison of Near to Terra as the narrative for attractive stablecoin yields proliferates,” he noted, adding:

“Terra currently has a market capitalization of approximately $40 billion while Near sits at $10 billion. The catalysts above will strengthen Near’s fundamentals in both the short and long term and likely cause its market capitalization to appreciate by 100% at minimum over the next few months.”

Slim Trady, a pseudonymous market analyst, also expects NEAR to reach new all-time highs, noting that there is “no substantial resistance left” on the coin’s chart that could cap its upside moves.

Don’t act like nobody told ya about $NEAR.

Patience. That’s all you’ve ever needed in this market.

New ATHs are very #NEAR…teehee.

✍️✅ https://t.co/M2QdtXvdE7

— Slim Trady – non giver of ICP (@TradySlim) April 7, 2022

NEAR Coinbase listing near? 

Despite being in the top-20 crypto assets by market capitalization, NEAR remains listed only on a few crypto exchanges, including Binance, Huobi, KuCoin, and Upbit, limiting its exposure, especially in voluminous markets like the U.S.

Related: Terra buys $200M in AVAX for reserves as rival stablecoins emerge

But Kole noted that Coinbase, one of the leading U.S.-based crypto exchanges, will list NEAR on its platform “in the next couple of months,” noting that it would help boost the coin’s retail visibility.

“This also paves the way for Near NFTs to be integrated into Coinbase’s upcoming NFT marketplace.

FTX, a crypto exchange headed by Sam Bankman-Fried, could also list NEAR pairs given its investment arm FTX Ventures being one of the backers in Near Protocol’s latest $350 million funding rebound.

Price levels to watch

From technical perspective, NEAR now eyes a run-up toward its current record high above $20.50.

A decisive break above the level, which coincides with the 1.0 FIb line of the Fibonacci retracement graph, drawn from $20.78-swing high to nearly $6-swing low, could have NEAR eye $29.70 as its next upside target.

Conversely, a pullback risks putting NEAR’s price en route below its interim support near $17.55, with the next downside target at around $15.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

The Golden City is losing its shine as one of the largest United States-based cryptocurrency exchanges closes its San Francisco-based headquarters. 

Kraken CEO, Jesse Powell retweeted that Kraken will close its global headquarters on 548 Market Street, in the center of San Francisco. In the retweet shared by a San Francisco-based political commentator, Richie Greenberg, the decision cites that:

“We shut down Kraken’s global headquarters on Market Street in San Francisco after numerous employees were attacked, harassed and robbed on their way to and from the office.”

Cointelegraph reached out to the Kraken team for comment and will update if and when they reply. 

A poor advertisement for living in California’s financial center, the tweet also states that “San Francisco is not safe,” and crime is “dramatically underreported.”

BREAKING: KRAKEN CEO Jesse Powell @jespow today issued a statement regarding rampant crime in San Francisco and the failures of DA @chesaboudin . pic.twitter.com/7gx7PldQM0

— Richie Greenberg (@richieSF2016) April 7, 2022

U.S.-based cryptocurrency exchange Coinbase will also close its San Francisco headquarters in 2022, however, no mention of crime or homelessness was made. Instead, Coinbase followed the lead of its competitor Binance in becoming a fully remote, global company.

The Twitter community was quick to respond to the Kraken news, sharing dark anecdotes of working in San Francisco.

I worked at Market St for few months, it is crazy, it turns into skid row after 6pm. I’m from Europe and never seen anything like it. Still have flashbacks of the things I witnessed. Just tried to look away and not get stabbed. Remember walking in the smell of skunk and pee.

— Markus (@markustallinn) April 7, 2022

The living situation is so dire that rhere are applications that track human waste around San Francisco, Snap Crap is among the most popular. The applications help San Franciscans navigate the city without puting their foot in it.

The Twitter and Reddit community comments shone a light on how soaring rental prices have made homelessness more common, while crime is “rampant.” The average rent is now roughly $3,000 a month, while the San Francisco Chronicle estimates that there are more than 18,000 homeless people in the city.

Related: Bolt to enable Bitcoin and NFT access via Wyre acquisition

A report in 2020 revealed that San Francisco and the surrounding zone, the Bay Area, boasted the highest concentrations of crypto investments. In light of Kraken’s decision, and the social crises in San Francisco, the hold on crypto and the future of finance may falter.

Other US cities and states have made clear their intentions to attract crypto capital: Texas, for example, hosts pro-Bitcoin Senator Ted Cruz,  (BTC) while Web3 and crypto payments have been lauded by the mayor of Austin.

As Cardano (ADA) prices fall back towards the psychological one dollar level, more and more investors are finding themselves with unrealized losses by holding on to the digital asset.

Cardano’s ADA token has had a bearish week. The price has fallen 11.4% since Monday resulting in more holders being in the red. More significantly, ADA is now 64.7% below its September 2 all-time high of $3.09 and is in danger of falling below a dollar over the next few days should the trend continue.

According to IntoTheBlock’s “in/out of the money” indicator, more than two-thirds, or 67% of ADA holders, are underwater. A quarter of Cardano investors are in the green, and 9% of them are at a breakeven point.

The indicator identifies the average cost at which the tokens were purchased and compares it to the current price, which was $1.09 at the time of writing.

The analytics provider reported that 3.41 million ADA addresses are in the red compared to just 1.25 million in the green.

A related metric is the amount of time the token has been held. The vast majority, or 76% of ADA holders, have held it for between one and 12 months. Just 11% of Cardano investors have held the token for more than a year, and those are the ones that are still in profit.

From a technical standpoint, ADA has turned bearish and could quite quickly revisit its 2022 and yearly low point of around $0.80, which occurred in mid-March. This would plunge even more investors into the red unless they sell at a loss.

The slide in prices could be tied to the network not living up to high expectations set around the launch of smart contracts.  In terms of the numbers of decentralized applications (DApps), Cardano is still something of a wasteland with DeFi Llama reporting that there are just ten DeFi protocols running on the network with a combined total value locked of around $233 million.

Cardano co-founder Charles Hoskinson however believes that many Cardano dApps are waiting for the Vasil hard fork in June to launch. The “Basho” phase of the Cardano upgrade roadmap will focus on scalability and smart contracts with new technology called Hydra to boost network throughput even further.

Related: Cardano Foundation and the University of Zurich expand academic blockchain research

In terms of other fundamenta Cardano is looking relatively strong. Network demand surged to record capacity earlier this year when the much-hyped SundaeSwap decentralized exchange was launched.

Santiment reported that Cardano was the most developed crypto project on GitHub in 2021, and Cardano NFT bonds were unveiled this week, providing another investment vehicle on the network.

However, unless there is a significant turnaround in trading sentiment, the ADA selloff may start to accelerate, putting more holders deeper underwater.

Scott Melker, veteran trader and pocaster, is convinced that major layer-1 protocols should be part of everyone’s investment portfolio. Instead of picking individual crypto projects, such as NFTs or blockchain games, Melker thinks it makes more sense to bet on the blockchain infrastructure on which these projects are built. 

“Any of these small projects could absolutely go nuts. But you’re going to have trouble choosing what they are. You should just own the layer-1 and the infrastructure that they’re all built on,” he said in an exclusive interview with Cointelegraph. 

“You may not own a Bored Ape, but Ethereum holders have certainly benefited from the success of Bored Apes!” he pointed out. 

Talking about his portfolio construction, Melker revealed that about 65% of his assets are currently in crypto. Besides Bitcoin (BTC), which makes up the bulk of his long-term holdings, Melker is extremely bullish on Ethereum (ETH).

“Nothing is going to kill Ethereum. I believe Ethereum is here to stay. I believe it’s an extremely important asset and one that everybody should have exposure to,” he said.

Melker believes that the upcoming Merge, which should complete Ethereum’s transition to proof-of-stake, will be a massive boost for the asset’s price.

“This is a massively bullish event for Ethereum. (…) I think it will be a better chain, more usable after this happens,” he said. “We will eventually see Ethereum at $20 thousand, $30 thousand, $40 thousand.” 

Watch the full interview on our YouTube channel and don’t forget to subscribe!

Over the last couple of years, the world has been grappling with the lack of semiconductors, which are the substances that conduct electricity between metals and isolates. The most famous semiconductor is silicon. 

If correlating this concept to electronic devices, then the key semiconductors are processors and other microcircuits that are present in almost all devices that people use every day, from smartphones to cars. 

In 2021, semiconductors hit a world record in terms of sales. Electronics production also boomed, with hundreds of millions of complex semiconductors being devoured by gaming consoles. The number of GPUs produced grew to unseen levels, with major manufacturers like Nvidia seeing all-time highs in terms of production.

Despite all this, electronics prices skyrocketed and manufacturers of related goods were struggling to find semiconductors. 

Crypto miners: Guilty or innocent? 

It has become customary to not only mention but to blame cryptocurrency miners for the global shortage of GPU cards and semiconductors. To their credit, miners would buy up huge swaths of graphics processing units, sometimes emptying whole stores at once.

Some countries that are feeling the shortage of cards acutely are already fighting against cryptocurrency mining.

At the same time, the manufacturers, themselves, do not take such a definite position. AMD CEO Lisa Su said in June 2021 that miners are far from guilty for the lack and even complete absence of certain GPU cards. She said that their influence on the market is generally minimal and does not exceed 5%–10% of the total demand. 

Andy Long, CEO of White Rock Management, a digital asset technology company situated in Switzerland, agreed with Su that mining isn’t entirely to blame:

“GPUs are still in high demand to power Ethereum and other altcoin mining. Nvidia’s published estimate for the percentage of traditional GPUs going to miners is in the single digits, but the true figure is likely higher than that — somewhere around 20%.”

Another important factor behind the shortage of GPU cards is the COVID-19 pandemic. The supply chain showed that due to the many employees who began to work at home, the number of buyers increased so much that graphics processors — a crucial component in home computers — simply disappeared from sale.

However, the situation with miners’ appetite for GPU cards began to change noticeably at the beginning of this year. 

Firstly, the change is due to Ethereum (ETH) switching to the proof-of-stake (PoS) protocol, which is slated to take place in the summer of 2022. 

Currently, the Ethereum blockchain is maintained by miners solving cryptographic puzzles and subsequently receiving a reward, the value of which is calculated according to the hash rate of each individual GPU.

This is called proof-of-work (PoW). As soon as Ethereum switches to the new protocol, miners will no longer be needed as crypto holders will validate block transactions based on the number of tokens they stake.

Since GPU cards will no longer be needed for Ether mining, once Ethereum 2.0 goes into effect, the demand for them will reduce drastically. 

This shift in demand is already very noticeable. In the first two months of 2022, Nvidia’s GPU card sales are down by 75% compared to 2021 as large mining companies that used to purchase such cards have stopped buying. This also means that Nvidia will be forced to redirect GPU cards to the gaming sector and cut prices. 

There are other reasons for the price decrease. Since April of this year, the United States has reduced import tariffs on the supply of goods from China by 25%. America is one of the main players in the GPU market, where companies such as Nvidia, AMD and Intel operate, so the tariff cuts have led to lower prices for GPU cards.

Buyers’ interest in the cards is also declining against the backdrop of a gradual return of people to offices after two years of remote work and the need to have a modern computer at home to comfortably perform work duties.

“Dedicated mining cards are also a larger part of the picture now,” said Long, “These are cards without video output that are solely for data processing. We first saw these in 2017 with the launch of dedicated Pascal architecture cards such as the P106 and P104. Now the Nvidia CMP range explicitly targets the miners — with some dedicated high-end SKUs only available to those willing to place orders in the tens of millions of dollars. The shortage in dedicated gaming cards is as much to do with simple supply and demand for the core purpose of gaming — and also “HPC” type applications where people use gaming cards for rendering and AI tasks.”

The deficit is not over

The solution to the problem of the shortage of GPU cards sounds simple: Producers need to make more cards to meet the demand. However, in practice, this is not the case. One of the problems is the supply of silicon wafers, which are used to produce the chips. In 2019, the demand for wafers was rather low, but in 2020, after the whole world went into quarantine, the demand for computers, tablets, TVs and other equipment that requires chips rose sharply. The demand for wafers has increased so much that Sumco Corp, the second-largest manufacturer of wafers, said that its production is booked until 2026.

However, the production of processors, GPU cards and memory cards requires more than just silicon wafers. After the start of war actions in Ukraine, world manufacturers of semiconductors faced a shortage of neon, which is necessary for the operation of the laser systems used to create the chips. The problem is that the two Russian companies, Ingas and Krion, produce 45%–54% of the world’s supply of neon-containing gas mixtures. How global manufacturers will look for a way out of this situation is not yet clear.

In March 2022, some experts believed that the semiconductor shortage could end in 2023. In particular, the head of Micron Technology, one of the biggest producers of computer memory and computer data storage, believes that starting this year, manufacturers will be able to build up a significant stock of chips as well as arrange supplies. In 2023, there will be no such problems and global companies will largely be able to reach the level of production that they had before the pandemic. 

But the situation in Ukraine can stop this recovery and redouble the deficit of chips, forcing the price to rise with renewed vigor. Recently, Intel has claimed that it has stockpiled and continues to monitor supply disruptions while trying to find alternative sources of neon. Samsung stated that some factories may face shortages, the Dutch ASML, which produces scanners for printing chips that are used by TSMC and Samsung, didn’t hide their concerns and said that over the next two years, producers could face a shortage of major machinery equipment. 

So what will happen to semiconductors in the nearest future, and therefore to equipment? The GPU market could likely recover from the COVID-19 pandemic and the declining demand from miners, but global events are once again putting manufacturers to the test with the lack of components for the production of equipment. Of course, it is worth believing that the business will find the raw materials and build new supply chains, but no one can predict how soon this can happen. In any case, the shortage of semiconductors seems to continue, and GPU card prices will go up again, but in this case, the miners will have had nothing to do with it.

NFTs and the Metaverse are the hottest topics in the cryptocurrency ecosystem right now, but the next big thing might just be decentralized social media. Like decentralized finance, decentralized social media platforms don’t have a centralized governing body and may, someday, provide viable alternatives to established platforms like Twitter, Instagram, Facebook and TikTok. The technology is currently evolving just beyond the embryonic stage of development.

Yung Beef, or YB — who serves as content lead and community manager at Subsocial — says that centralized social media platforms are unfair to community members and content creators. “It seems pretty obvious that centralized social networks are susceptible to lots of shady stuff, with the mystery algorithms controlling what people see, people getting shadowbanned or banned outright for whatever reason, etc. And it just gets worse when you factor in that a lot of people earn their livelihood on these platforms and their food bill is totally at the whim of the central authority.”

According to Subsocial, the centralized social media industry is plagued by global censorship, a lack of customization, unfair monetization, algorithm dictatorship and a monopoly on network effects. 

Stani Kulechov, the CEO of Aave and a decentralized social media developer, believes that content creators should have a permissionless, censorship-resistant distribution channel with their audience. He tells Magazine that “At least the people that are posting the content, creating the content, consuming it, sharing it — they would definitely benefit from decentralized social media.”

Kulechov made headlines in and outside of the cryptocurrency community last summer when he hinted that crypto giant Aave was considering building “Twitter on Ethereum.”

Since @jack is going to build Aave on Bitcoin, Aave should build Twitter on Ethereum

— stani.v3 (👻,🌿) (@StaniKulechov) July 17, 2021

Michael Marra, founder and CEO of Entre — a social media application that runs on the DeSo blockchain — believes that decentralized social media is really about “giving the power back to the people.” According to him, one of the problems with centralized platforms is censorship, while another is monetization, but more on both of those later.

How does it all work?

Centralized and decentralized social media platforms both utilize some type of social graph — a model of a social network that maps everyone on a platform and how they’re related — and allow users to communicate with each other on a front-end platform. Traditional social media platforms are totally self-contained, and the host company controls the data servers. Twitter owns and controls all its content — all your content. The same is true with Instagram, Facebook, TikTok, etc. Decentralized social media platforms live on public blockchains, and for the most part, anyone, anywhere, can operate a node, access the back end, create an app and curate a feed. 

According to its website, “DeSo is a new layer-1 blockchain built from the ground up to scale decentralized social applications to one billion users.” The blockchain is open-source, with the code and all the data stored directly on-chain. There are over 200 apps deployed on Deso, and users who create a profile in any app can easily take that profile and their community of followers along with them to any app on the blockchain.

This new category of decentralized infinite-state applications that we are exploring with DeSo is a huge and untapped market for the crypto space to disrupt.

With DeSo, we can now enable so much more to live completely on-chain and become truly decentralized like never before.

— DeSo (@desoprotocol) March 24, 2022

Entre, short for “entrepreneur,” is a social Web3 application that runs on DeSo. On Entre, the self-employed, the traditionally employed and any other professional can post Twitter-like content and carry out business transactions. They can conduct meetings, host virtual events and hire staff members, with the app functioning like a decentralized, digitally monetizable alternative to LinkedIn, Zoom and Google Calendar — all jammed together into a single product.

While Entre runs on a social blockchain, the Aave-backed Lens Protocol is deployed on Polygon. Kulechov says that Lens is ”actually a decentralized social graph.”

According to Kulechov, when a user of an app on the protocol creates a profile, that profile is tokenized as an NFT. Whenever someone follows a profile, they create a relationship on-chain that can’t be arbitrarily broken by the platform or by anyone else, as those relationships are also tokenized as NFTs that can be viewed in a digital wallet like MetaMask or on the web on OpenSea.

Subsocial doesn’t consider itself a decentralized social network, rather a platform for building social networks. It allows users to create profiles and customize personal “Spaces” and claims to have serverless public timelines, roles and permissions, user governance, moderation, Spaces for DAOs, and a treasury. The platform runs on the Polkadot and Kusama blockchains, and it recently built its first app, a decentralized Reddit–Medium hybrid.

According to YB, Subsocial plans to remove the profiles in the future. To save space, all content uploaded onto Subsocial (pics, videos and text) is hosted on the InterPlanetary File System, with an IPFS content identifier uploaded to the blockchain. Each IPFS node is hosted by one or more people, and those node operators are in control of what they host on their servers.

While developers at Lens Protocol, Entre and Subsocial build out the next generation of decentralized, Web3 social platforms and apps, other platforms such as Theta and Audius are integrating social media tools into decentralized video and audio streaming services. Theta is a peer-to-peer network operating on its own blockchain, with users sharing bandwidth to relay video to one another. On its website, YouTube co-founder Steve Chen is quoted as saying the project can bring “improved video delivery at lower costs.” Like on YouTube, brands and creators can stream content as followers comment in real time.

Audius, meanwhile, is a decentralized audio streaming platform that runs on Solana and hopes to afford everyone the freedom to distribute, monetize and stream any audio content. Artists can easily upload musical clips to the platform, while fans can listen to original compositions and mixes, curate libraries, and repost, follow, like and share content. It offers the same amount of fun but without middlemen throwing trivial ads your way and then taking a hefty cut from content creators. 

What about the bad guys?

If creators are expected to monitor their own content on a completely decentralized platform like Subsocial, how can the distribution of illegal content and disinformation be controlled? Social media moderation has been a controversial topic for years, and platforms like Facebook and Twitter haven’t always done a good job both filtering out dangerous content and maintaining a commitment to open dialogue. 

YB explains to Magazine that Subsocial is censorship-resistant, while Kulechov says that Lens Protocol “is built completely to be agnostic in the sense that it’s a technical solution, basically to build social media applications.” Entre’s Marra says:

“If it is open, that means anything kind of goes. You can control it to some degree.”

Marra believes that blockchains can be built to facilitate the community’s ability to report things. Community members, especially those with higher authority — like those with lots of followers or a good reputation — can signal that a bad actor is posting dubious content. The offender’s content should then go way down in the feed. Marra argues that blockchain verification will also prevent a lot of “this stuff,” saying “You will instantly know that this person is not legit.” 

According to Kulechov, moderation is all about creating choices for everyone. Lens Protocol has a common social graph where all user information is actively linked, and unlike traditional social media, that social graph is decentralized. Kulechov believes that decentralizing the social graph so that everyone has access to it provides more opportunities to moderate more humanely.

This accessible interconnectivity affords developers opportunities to create algorithms focused on content moderation. It essentially puts the front ends of the protocol, the applications, into a position where they compete to offer accessibility to accurate, appropriate information. Kulechov says:

“Maybe the right type of content moderation might be community-led, where the community’s site people announce themselves and moderate or select the algorithms.”

Subsocial has three levels of moderation. To start, every post is made in a Space. “Think of Spaces like a subreddit, a Facebook group, a Twitter profile or a blog,” YB says. Each Space has at least one owner who can moderate its content. Also, each IPFS node is hosted by at least one community member. Those operators can control what they host on their servers. Lastly, anyone can build a front-end social application on the platform. A front end connected to one of the Subsocial blockchains can read all the content on the chain. The operator can control what is distributed on the front end.

Learn the difference between moderation and censorshiphttps://t.co/zb923stv1o

— Subsocial (@SubsocialChain) March 22, 2022

Still, if a front-end operator and a group of bad actors were determined to disseminate misinformation or illegal content, YB says it could be shut down with an on-chain vote. “[That] would be a big deal and likely a big hassle, but it also would be pointless, as those people could just make another Space right away and continue on.” YB argues that people use the internet to coordinate violence and share illegal content all the time — it’s just hidden, which it still would be, as large social networks built on Subsocial wouldn’t show that stuff.

One thing to note, however, is that centralized social media platforms with the power to shut down a creator or community with the click of a button have struggled for years to contain the distribution of illegal content and misinformation.

As such, even though relying on the community to moderate itself is egalitarian and sounds good in theory, it may not prove effective in practice. Self-moderation on censorship-resistant platforms would likely require fully engaged community members. That may not always be the case in the Web3 environment, as active members of communities need to be present in significant enough numbers to monitor bad actors on any given decentralized network. For example, a recent analysis ranking community engagement in DAOs showed mixed results.

How might a censorship-resistant platform respond when an extraordinarily large community goes off the rails? Considering the massive amount of disinformation that could be generated by an organized, well-funded army of bots, could a universally adopted, decentralized network moderate a community of thousands of such propagandists?

Show me the money — all the money

Equitable monetization for community members and content creators is one of the key features of the decentralized social media ecosystem. Juxtaposed against unbalanced monetization schemes in traditional social media, decentralized social earning could be a game changer for content creators and magnetize universal adoption efforts.

YB tells Magazine, “Personally, I think the monetization stuff will be much more attractive to content creators than any censorship resistance. YouTube, for example, takes 45% of ad revenue, which is pretty insane.” He adds further, ”I’m really interested to see what happens with the tips. I hope we see the emergence of a micro-tipping economy, since it will be so easy. Scrolling through the timeline and see a joke that brightens your morning? Why not tip them $0.50 in a second or two?”

Lens Protocol is taking a hands-off approach to monetization. “We wanted to touch monetization as little as possible and give a lot of space for our developers to come and solve that,” Kulechov says. Lens is currently building a very basic monetization function around content collection and amplification. Whenever creators post music, text, audio or video, followers can then collect that content as NFTs. There are different collection modules, and followers can mint the NFTs themselves. If those followers then amplify that content, the creator collects mirror fees, which is like monetizing a retweet on Twitter.

On the DeSo blockchain, the DESO token can be used to purchase creator coins. BitClout, Diamond and CloutFeed are Twitter-like applications that allow followers who support a particular creator to invest in their coin, exponentially increasing its value. Although not recommended, the coins can be converted back to DESO and actively traded or cashed out for fiat. Entre, according to Marra, isn’t “into creator coins” and is more focused on allowing creators to earn DESO through tipping when they livestream.

Entre users can also sell tickets to in-person or virtual events and charge for private one-on-one services like consulting and coaching. The app offers a Slack- and Discord-like community feature where membership fees can be charged and users can offer services like graphic design. Currently, DESO is the only cryptocurrency accepted on the app, but Marra intends to offer multiple tokens in the future.

Theta has been in the monetization game for some time and offers crypto rewards for creators, fans and hosts. The platform has two tokens: THETA and TFUEL. Owners of THETA, its native token, can participate in governance and earn more THETA by staking or running a node. TFUEL is essentially a utility token for the platform and can be earned by community members for watching streams on Theta.tv or hosting Guardian and Edge Nodes. They can spend TFUEL on real-world merchandise in the TFUEL Shop or use it to buy subscriptions to paid content.

Just got Presessence vol 1 up on @AudiusProject ! LFG – thanks to everyone sharing It on there Right now!

I see the value in web 3 streaming services, along with NFT platforms for songs. It’s important, especially for the transition from web 2. https://t.co/55XIITyUNX pic.twitter.com/2B4YajNpkG

— Domino △ (@dominosmusic) March 8, 2022

Audius, meanwhile, uses its AUDIO token to help artists monetize their work and fans support them. Community members can earn AUDIO for uploads, invites, going mobile, linking social media accounts and sustaining listening streaks. Fans can send AUDIO directly to artists.

Decentralized social media certainly has the potential to tip the equity and privacy scales in favor of users and content creators. It could reshape the social media industry and redefine an era of digital free speech in the Web3 era. But in order to achieve that, it may still need to find an elusive solution to content moderation, and it will need to achieve universal adoption. Thought leaders in the space have their eyes toward the future, with Kulechov saying: 

“Adoption is gonna be a long game, for sure. It might take years to adopt. It’s basically one application at a time.”