The main drawbacks to social media are the loss of personal privacy, data protection and ownership of information. So the saying goes, “If You're Not Paying for It, You're the Product.” However, this 'centralized' control model of social media might be a thing of the past, thanks to blockchain technology. Specifically, ethereum, which brings the next-generation ‘decentralized’ models of social media. Ethereum is an open software platform that allows developers to build and make available decentralized applications.
A good example to illustrate this is Indorse, a rewards-based decentralized professional network on the ethereum blockchain. It was developed by Indorse Pte. Ltd., a Singapore-based blockchain company.
Indorse uses a LinkedIn-style professional networking model, but members retain data ownership while earning rewards for sharing their professional skills and using the platform. Users are incentivized, in other words. The data ownership and reward system are based on the blockchain principles of decentralization and tokenization. Tokenization removes sensitive data from your business systems and replaces them with an undecipherable token that can store the original data in a secured cloud.
Through its platform, Indorse seeks to resolve three basic problems of social networking platforms: economic, autonomy and trust.
The economic conundrum of traditional social media is that a social media company can't make money without selling your data. And the actual providers of information, i.e. you, don't receive any monetary reward, which seems unfair.
Social media's autonomy problem refers to the concentrated control over the platform, which rests in just a few hands.
The trust problem springs from the autonomy problem because a centralized power makes all the decisions.
A white paper written by Indorse highlights: “To be clear, we are not against advertising, and we are most certainly not against social media. However, we are against the centralization of social media. We believe the solution is a new model of social networks—a decentralized one that places ownership of information back in the hands of the members.”
How Indorse Works
Indorse uses internal rewards, called Indorse Rewards, and a reputation system, dubbed Indorse Score, to incentivize members to not only add their skills or accomplishments but to endorse other members as well.
Indorse is looking to engage members to actively participate on the platform. This is how members earn Indorse Rewards. The decentralized platform also involves advertisers, who purchase space using Indorse Tokens (IND Tokens) and are bought through an exchange. A part of these IND tokens will be shared with the members who create the content.
Indorse completed its Token pre-sale, which ran from July 26, 2017, to July 29, 2017, receiving 13,807 ether (ETH) in the public pre-sale and approximately 4,000 more ether in private placements. Indorse held a Token sale on August 8, 2017, through Sept. 8, 2017. Here’s a snapshot from its fact sheet.
Rising Trend of ICOs
Raising money for projects by selling “Tokens” via an Initial Coin Offering (ICO) is increasing in popularity. According to UK-based CoinSchedule, which provides cryptocurrency ICO statistics, US$20 billion has been raised in ICOs through October 4, 2018. This exceeds the venture capital investment in firms related to Bitcoin and blockchain technology.
In a 2017 report, The Securities and Exchange Commission (SEC) stated that “issuers of the distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies.” The report further added, “Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors' protection.”
Eddy Travia, CEO and Co-founder of Coinsilium, shared his views with Investopedia: “The SEC message following its review of the DAO did not surprise the market nor the crypto community. The positive aspect of this message is the fact that tokens are being seriously considered by regulators across the world and a clear position by regulators will serve the token economy as a whole." He further added: “There are thousands of token smart contracts and thousands more will be created in the next six months. This puts immense pressure on founders to find adequate legal advisors, technical experts, and marketing consultants who have experience in a token generation event.”
The Bottom Line
Indorse creates a parallel decentralized version of a professional networking platform. Other such projects that are following suit will one day build a decentralized world in social media networking. Together, decentralized platforms and tokenization are emerging in a big way and if the trend continues—more regulations will be created over time.