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Key Takeaways
Alchemy : Ethereum :: Neynar : Farcaster
Neynar is not only abstracting backend compute, but will also provide Farcaster data services to businesses like Salesforce did with cloud CRM.
In order for Farcaster to hit product market fit and present a unique value proposition, it's crucial for Neynar to grow in parallel.
Apps using crypto rails will be forced to win by building better experiences. The moat is no longer networks.
A letter to Neynar:
A few days ago, Dan Romero casted that Farcaster (FC) is nowhere near product market fit (PMF). For him to even consider it, the protocol needs to sustainably have 200k daily active users.
That's a 100x from where we are today.
To achieve that level of growth, the FC community needs to prove to people that there is value they are missing out on. This can be in the form of money, opportunities, marketing leads, alpha, etc. As great as they are, good vibes and friendly conversation will only get the protocol so far.
My belief is that Neynar is the most crucial component of the equation to help Farcaster hit PMF.
Why? Because the entire purpose of a sufficiently decentralized social protocol is for people to make use of the independent data layer. Neynar is abstracting away the infrastructure complexities and enabling people to tap into the social data in meaningful ways.
Let's get one thing out of the way: Neynar is not just a tool to help developers build new Farcaster clients. That may have been the obvious first use case, but that framing limits the true potential of the product.
The bigger picture here is to think of Neynar as the Farcaster Cloud.
What do I mean by that?
I'll get to Neynar's value add in a second, but first let's rewind the clock back to 1999.
The death of software and the rise of SaaS
Four nerds just signed a lease in Telegraph Hill, San Francisco. The one bed apartment will serve as their office for their newly incorporated company: Salesforce.com.
Marc Benioff and the gang were on a mission to revamp the way businesses handled customer relationships. Salesforce understood early on that the internet had made it possible to kill software and give birth to the idea of software-as-a-service. Up until then, companies were either using paper and filing cabinets or were downloading software on their computers.
But Salesforce changed the game by introducing a web-based CRM solution. This meant that instead of installing heavy, disconnected software, companies could manage their customer relationships synchronously through the internet. Salesforce made CRM accessible, scalable, and flexible by using the cloud, breaking away from the limitations of physical infrastructure and on-premise software.
Similarly, Neynar can be seen as the Farcaster Cloud: transforming how businesses and developers interact with a decentralized social network. Just like Salesforce leveraged the internet to revolutionize CRM, Neynar aims to leverage Farcaster's social graph to revolutionize social media and provide hivemind-as-a-service.
Now you're maybe thinking...did YB just compare Neynar to Salesforce? Isn't that one of the most boring products of web2? Maybe it is. But their product was a hit right out of the market. Look at their revenue numbers in the first 4 years:
2000: $5.4m
2001: $22.4m
2002: $51m
2003: ~$100m
People understood that the internet was important to enhance their businesses. It wasn't just about stripping away the need to set up servers. The hidden value add was having Salesforce eventually provide enriching insights and an ecosystem of tools (AppExchange) to change the way companies thought about their marketing and operations.
Neynar's Value Add
So how will Neynar provide value to showcase the importance of a separate data layer?
Just like Salesforce, we can think of this as a two prong approach that will feed off of each other:
The first is the obvious one of delegating backend compute and providing hardware support for developers looking to bootstrap their product with the Farcaster social graph.
The second is non-obvious right now and involves a B2B approach where Neynar meaningfully provides intelligent data insights to businesses looking to enhance growth and product.
Let's dive deeper into both.
Reducing friction to build in the Farcaster ecosystem
Neynar's initial customers are developers who are building directly on top of Farcaster. The developer tooling saves builders a ton of time and hassle by providing a ready-to-go setup for Farcaster hubs (where protocol data is stored). They also provide a suite of APIs and SDKs so devs can immediately get started on their project.
Woj is doing a great job of demonstrating this with Supercast, a client focused on providing Twitter like use cases such as threads and lists. Bountycaster is another example that effectively used Neynar to build a bounties marketplace on top of the Farcaster social graph. I mentioned this in my Bountycaster letter:
In reality, Linda, you have the following and network on Twitter where you could have easily brought a non-trivial amount of users from the beginning. But why bother building a new "Bountycaster community" when you can just bootstrap the product with a high quality open-source social graph that the Farcaster team has been working on for the last few years?
In the coming years, I expect an endless suite of products to be built that are focused on hyper niche use cases. Farcaster channels will be a huge factor in providing obvious ideas for new clients and peer-to-peer marketplaces.
My prediction is the first big wave of FC ecosystem apps will be seeded by the fitness, sports, and trading/degen channels.
Additionally, Neynar is making it simpler for founders to incorporate in app discovery for new users onboarding onto their apps.
Now, crypto consumer builders can just get right to prioritizing the main product value and bootstrap the network effects through Farcaster.
Two good examples here are Once Upon and Interface. Both are using Neynar to help users immediately find their Farcaster friends.
The closest equivalent of this today is finding friends from your contacts. However, strictly using contacts limits optionality. It's the niche networks on social media platforms that provide the strongest value for discovery and until recently it wasn't possible to tap into this data.
Think of the web2 apps on your phone today. Most have a social layer of some kind built into it. Strava and health apps, games, and even productivity tools. The problem with this is that you have to reinvent the wheel every time! Each app has it's own social graph and you're forced to do the same things repeatedly.
Now, with Farcaster and crypto wallets, users can retain a single identity and reputation. And as they hop around different products, the relevant people and attestations from their network are auto populated.
The idea of onboarding to a new product is going to look totally different in crypto. It won't feel like you're "starting fresh" with every product.
Apps using crypto rails will be forced to win by building better experiences. The moat is no longer networks.
Lastly, if things go as expected and the next bull market brings a fresh set of web2 developers, Neynar will be essential to help onboard them to Farcaster.
Prior to Neynar, developers that interacted directly with Farcaster would need to understand Hubble gRPC data, keypair singing, etc. in order to interact with casts.
Neynar removed these obstacles and abstracted them with a single REST API call. Web2 builders won't feel the friction of building in a new paradigm.
Hivemind-as-a-service
What is a hivemind?
An entity consisting of a large number of people who share their knowledge or opinions with one another. Collective Intelligence.
Nothing new. We've been calling Twitter the public town square for years now. And Reddit is the front page of the internet. These two platforms have hundreds of millions of people around the world sharing stories, wisdom, news, experiences, and arguments for every topic you can imagine.
There is no better resource for pulling data about the world than these two social media platforms.
But we can't today. Twitter and Reddit both have a history of unreliable API services, price changes, etc...aka API rug pulls. I asked this question on Farcaster the other day:
In the last 25 years, have any of you been rug pulled by a big tech company bc of API restrictions/changes? If so, what API were you using and what was the context?
Furthermore, both are expected to optimize one metric: # of minutes a user spends on their website in order to maximize ads. This means they need to hoard as much of the data and UX capabilities as they can to keep their edge and sustain revenue.
All this to say that the current infra set up and business model of social media products is not built in a way for people to extract reliable and meaningful value from the treasure chest of data on the apps.
Like I said at the start of this letter, it's essential Farcaster demonstrates a unique value prop. There is a wealth of data in what people say. And unlike every other social media giant, it's possible to extract value from this data on Farcaster.
As Dan and team focus on growing the total addressable market (TAM) and quality # of DAU on Farcaster, there's now a wedge in the market for a team to aggregate, clean, label, and make sense of all the protocol data.
This is where Neynar comes in. The team is in a position to sell access to rich social hivemind insights in a meaningful way to a variety of businesses.
Just like Salesforce made it crystal clear that CEOs will increase their sales by using Salesforce cloud, Neynar can hopefully provide a similar guarantee with Farcaster Cloud.
All of a sudden, this opens the gates to a flood of new customers who are looking to optimize their product and marketing through the newly available social data.
For example, in the past two months, the degen channel on Farcaster has taken off. There's been a variety of meme tokens launched, people are having fun experimenting, and even Vitalik made an appearance.
It would be highly beneficial for a company like Nansen or Messari to partner with Neynar and receive a continuous stream of data on all the NFT & altcoin trading insights people are posting on Farcaster. This could be used in the product or even simply shared with their community of active traders.
Similar to how prediction markets demonstrate what people really think, Farcaster's data layer will provide an endless amount of "on-the ground" data about anything and everything.
Closing Thoughts
However, it's important to note that the Farcaster protocol data is not Neynar's moat- anyone can offer this as a service literally today.
Just like Alchemy, Neynar will have to build their moat by building a product that people want to pay for. In Alchemy's case, the Ethereum protocol was available to everyone - they had to have the best UX, developer relations, and shipping velocity.
It seems clear to me that if Farcaster is going to hit product market fit, Neynar will play a huge role. If anything, Neynar and Farcaster will be feeding off of each other.
Farcaster provides initial DAUs and content --> Neynar gets first set of customers excited to interact with protocol data --> Those companies gain a competitive advantage and bring more people to Farcaster --> More DAUs --> More data for Neynar
That's all for today's letter!
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- YB
