The Funding: Is decentralized social ‘dead’ — or is a revival coming?

Things moved quickly in decentralized social (DeSoc) or SocialFi this week, with two major protocols changing hands in under 48 hours. Farcaster was acquired by its infrastructure partner Neynar on Jan. 21, while Lens Protocol passed stewardship to Mask Network a day earlier. The back-to-back moves have reignited the debate about the future of onchain social.

At first glance, the Farcaster–Neynar deal looked puzzling. Merkle Manufactory, the company behind Farcaster, had raised $180 million and was last valued at around $1 billion. Yet it transferred the Farcaster protocol, its main client Warpcast, and Clanker — an AI-enabled token launchpad — to Neynar, a startup that had raised about $14 million. The structure sparked immediate skepticism until Merkle co-founder Dan Romero clarified the next day that Merkle plans to return the full $180 million raised to investors, implying that Merkle itself was not being acquired. That clarification quickly shifted sentiment on X, turning doubt into respect for what many saw as a rare show of accountability in crypto.

As for Lens Protocol, the project had raised at least $46 million across three rounds. “Some capital was returned to investors; the rest supported the development of the protocol, ecosystem, and Lens Chain,” Stani Kulechov, founder of Lens Protocol and founder and CEO of Aave, told The Block. “Now that this foundation is complete, stewardship of consumer products transitions to Mask, while Avara [the entity behind Aave and more products] continues in an advisory role focused on long-term standards and ecosystem integrity.”

The timing of the two moves — Farcaster to Neynar and Lens to Mask — is striking and difficult to dismiss as a coincidence. Why now, and why both at once?

Both protocols built a core onchain social infrastructure and attracted top-tier investors, yet neither broke meaningfully beyond a crypto-native audience. With both Farcaster and Lens now under new stewardship, the central question is unavoidable: is DeSoc and SocialFi effectively “dead” — or is this the groundwork for a reset?

Among investors, the answer is far from unanimous. Some see the category as largely finished; others believe it is simply early. One thing is clear, though: DeSoc is no longer a priority area for most funds.

Brandon Potts, partner at Framework Ventures, said investor attention has shifted back to crypto’s financial core. “Momentum is shifting as the industry re-centers on its foundational, finance-oriented use cases. We are seeing a rallying of founder and investor energy toward these core verticals where the sector’s primary potential resides. Consequently, I am prioritizing DeFi and the accelerating intersection of crypto and institutional finance,” Potts said.

Even investors of Farcaster, Neynar and Lens, including Paradigm, a16z crypto, Coinbase Ventures, Multicoin Capital, Variant, Standard Crypto, and Archetype, all declined to offer detailed views beyond public statements supporting the new leadership. For now, DeSoc appears to be firmly in “wait-and-see” territory.

Why DeSoc or SocialFi has failed to gain traction

Across conversations, a common theme emerged: social is one of the hardest consumer categories to crack.

“The biggest challenges have been onboarding friction, fragmented user experiences, limited distribution, and a lack of consumer-grade applications capable of competing with web2,” said Kulechov. Until recently, even the underlying infrastructure struggled with scalability and performance, he added.

But infrastructure alone was never the full answer. Social platforms live and die by network effects, and crypto-native products have consistently struggled to overcome that problem. Jakub Rusiecki, research associate at 1kx and co-founder of Social Graph Ventures, said social is uniquely unforgiving because “distribution and network effects dominate,” while crypto adds extra friction around wallets, safety, moderation, and identity. Many early SocialFi experiments, he noted, leaned heavily on financial incentives before giving users durable reasons to stay — such as consistently strong content or meaningful social loops.

That over-financialisation has been a recurring pitfall. Crypto investors and entrepreneurs often assume financial features will improve social networks, but that hasn’t yet been the case, said Lex Sokolin, co-founder and managing partner at Generative Ventures. “The lock in of TikTok and Instagram and X are just too strong to beat with speculative gambling,” Sokolin said. Alan Lau, chief business officer at Animoca Brands, echoed that concern, warning that excessive financialisation can degrade content quality and drive genuine users away.

Brandon Kae, my colleague and research analyst at The Block, was more direct. He said whatever traction DeSoc platforms achieved was often artificial — driven by airdrops or token rewards rather than organic demand. Users don’t switch platforms for ideology, he said. They care whether the app is “fun” and where their friends already are, he added.

It’s also worth noting that non-crypto decentralized platforms like Bluesky and Mastodon offer an alternative approach to open social without financial incentives, yet they too have struggled to break out beyond core, niche communities.

Others pointed to a cultural gap. David E, aka “Morning Mist”, cofounder and member at Social Graph Ventures, said many DeSoc teams were strong technologists but lacked “social DNA.” Platforms like Farcaster and Lens, he argued, never achieved true viral growth or strong long-term retention. Without brand participation, creator monetisation, or short-form virality, the flywheel never engaged, he noted. Building an onchain ad and creator economy may be possible, he said, but it is “orders of magnitude harder” than in web2.

What comes next for DeSoc and SocialFi

Views on the future of DeSoc remain sharply divided.

For optimists, the next phase is more product-driven. Kulechov said the viable path forward combines open infrastructure with focused consumer execution. “Meaningful consumer adoption takes time,” he said, adding that decentralized social could reach mainstream users over the next several years if products become seamless and intuitive.

Rusiecki of 1kx shared that view, arguing that crypto expands the design space for social rather than replacing existing platforms outright. The recent shifts at Farcaster and Lens, he said, are consistent with how early consumer categories evolve. “I might not know exactly what the breakout form factor will be yet, but I have enough conviction in the direction that I sleep well at night deploying into crypto social,” he said.

Others believe the breakthrough will come from rethinking monetisation. David of Social Graph Ventures argued decentralized social won’t scale until it fundamentally reshapes web2 ad economics. He pointed to protocol-level ad auctions that let brands bid for attention, with revenue shared more fairly between creators and clients. If successful, social accounts could become cash-flowing assets — “what if you could buy shares of MrBeast early?” — creating something genuinely new rather than a web2 replica, David said.

Lau of Animoca also sees a second phase forming. “We don’t think the narrative of DeSoc/SocialFi is dead, but we do believe the first wave is at an end,” he said. Lau believes the next iteration will require better user experience, embedded monetisation, and blockchain features that are largely invisible to users. As AI-generated content grows, he added, ownership and trust may become more valuable.

That view has gained some support from builders as well. Earlier this week, Ethereum co-founder Vitalik Buterin said he plans to be “fully back” to decentralized social this year. “If we want a better society, we need better mass communication tools,” he said, calling for more competition and experimentation beyond today’s dominant platforms.

Still, skeptics remain unconvinced.

Sokolin said decentralized social has so far “been a dead end.” Financial features haven’t improved the experience, he argued, and the network effects of web2 remain overwhelming. While portable identity and content ownership sound appealing, incentives haven’t aligned — and he doesn’t expect DeSoc to return anytime soon.

Kae was even more blunt. DeSoc and SocialFi are “effectively dead,” he said. “If you ask anyone who doesn’t work in or have a financial stake in DeSoc/SocialFi what they think about it, I’m sure they either don’t care or are bearish,” he added.

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