Web3 and Social Capital

May 14th, 2022

I posted the original version of this article on Dec.20th, 2021, on the WeChat platform, one of China's biggest content publishing platforms. With a recent paper published by E.Glen Weyl, Puja Ohlhaver, and Vitalik, I thought this is a good echo, also a simple enough explanation to that paper. So i decided to translate it into English - with google translate's help.

Social Capital- refers to the associations between individuals or groups - social networks, norms of reciprocity, and the resulting trust, are what people's place in the social structure brings to them.

There is no generally accepted definition for the concept of "social capital". From its primary connotation, social capital is a concept relative to financial capital and human capital. It refers to the close relationship between social subjects (including individuals, groups, and organizations). The state of connection and its characteristics its manifestations include social networks, norms, trust, authority, consensus on actions, and social morality. Social capital exists in the social structure and is intangible. It improves social efficiency and social integration through cooperation between people.

Aside from these complicated academic definitions, the most superficial expression of social capital can be understood as, "When you want to do something, how many people are willing to support you based on their understanding of you and social identity."

Chu Shijian founded Chu Orange(one of the most famous Orange brands) during his medical parole, and many business elites were willing to contribute money. This is the embodiment of Chu's social capital. Although he had no money at the time, he could easily make a comeback by relying on the social capital he had gained.

Chu Shijian was a Chinese business executive and entrepreneur. He turned the near-bankrupt Yuxi Cigarette Factory into one of China's most richest state-owned companies.He was convicted of embezzlement in 1997 and sentenced to life imprisonment. After being released on medical parole in 2002, he started his second company at age 75, an orange plantation with the brand name "Chu Orange". It was again highly successful and he became known as the "orange king"

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I have heard a friend describe it in the most simple words. He said that social capital is "who knows you, who you know". Although it is not comprehensive, it does touch the essence.

Limited by various factors such as technology, social scope, and behavioral transparency, traditional social capital can only be used in a small area and within the range of acquaintances. But even so, it constitutes an essential lubricant in this society.

The emergence of Web3 Space and DAO brings new possibilities. In such a space, the depth and breadth of social capital scenarios will be pushed to a new height through blockchain networks and protocols. A new network will be formed - a global credit network based on decentralized social capital, which may be a Disruptive opportunity.

I am always exploring new DAOs, and sometimes I need to chat with founders or core contributors to find out more info. It usually starts with a simple self-introduction, but I have met many people who said, "Bro, I don't need you to introduce so much; I know we are the same type of people. We have more than 20 common servers, even with some rare ones!" Essential trust is established in this way.

Of course, this level of trust is not enough. One approach I use to tell if an ID is trustworthy is to look at his history chat on discord. For example, when I meet a DAO member, I will go to the DAO server to see if he is active and what topic he usually talks about. If he behaves friendly. That will bring me considerable trust in that person. If I found he is just an airdrop hunter, the trust level will drop to zero.

The identity status and roles in discord servers and behavior constitute an essential basis for trust. If a person has made many contributions in a trustful DAO, even if we have never chated, trust will naturally arise. And it does not depend on one's IRL(in real life) identity at all. I don't need to know who he is in real life.

On-chain behavior is also an essential basis for providing trust. Which assets have been held, which applications have been frequently used, and whether he is a speculator with many shitcoins or a diamond hands? Which DAO votes did one participate? These all can be used to know status of a person (or an address).

But the current richness of data on the chain is far from enough, and it can only reflect a tiny part of a person's behavior. In building a more robust Social Capital based trust network, more aspects need to be taken into consideration. Fortunately, in the Web3 space with a global collaborative network, a person's actions, contributions, and deep social relationships are easy to observe. It can be captured by onchain protocols that will burst out of great value.

For example, I am a member of a DAO, and I recognize a contributor based on my observations. If he needs emergency help, I may be willing to provide support, including unsecured credit loans.

If it is not my will, but a particular protocol, based on a lot of analysis and observation of one's behaviors, the social status in the Web3 network, and the data on the chain, and finally determine that an id/address is trustworthy. If we also trust the judgment of this protocol, then the scene will change from a small circle of trust networks to a global trust network. I don't need to know a person, observe a person, or even know his identity; I just need the protocol to tell the person that he is trustworthy. At this time, any Web3 participant can use the Social Capital obtained in Web3 space to get more or less unsecured loans when they need funds. When it comes to kick-starting a project, it may also be easy to raise money.

Similar scenarios can be expanded a lot, not only related to financing. Once this trust network is built, it will burst out of great value. And individuals can also obtain more value based on their Web3 social capital. This helps the Web3 community value their social capital more, thus forming a more robust Web3 network.

But Rome wasn't built in a day. This is bound to be an epic journey. Innovators and builders, I will see you down the road.

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