Rate Limit Exceeded: When Nostr Met Bitcoin
We are careening ever closer to a walled garden Twitter where users pay to get in. Does decentralized microblogging have a prayer? Maybe...
Twitter is an absolutely fascinating real time case study. Over the weekend, many users (including yours truly) experienced what I can only describe as one of the strangest messages I’ve seen on the site before; “rate limit exceeded,” or in normal person speak, “you’ve hit your usage quota.”
The response from the dopamine addicts was equal parts annoyed and horrified. It led some to speculate that Twitter is either in some sort of financial trouble or is radically moving toward a completely walled garden - possibly both. At one point on Saturday, I could read tweets but not replies. Later, I couldn’t even see my own tweets in my profile feed. As I’ve since gathered, this was a common experience. While some reacted by angrily CAPS-locking into the abyss, I just closed my browser tab and went about my day. Logical question from the user’s vantage; why do this if you’re Twitter?
Almost every company doing AI, from startups to some of the biggest corporations on Earth, was scraping vast amounts of data - Chief Twit
If Musk is to be believed, there is an interesting artificial intelligence angle to all of this. I lean it could check out. If data is indeed the new oil, than the content Twitter owns is likely a treasure trove. I can’t say I fault Elon for not wanting AI models sucking the value of his investment without paying some sort of fee. Suddenly, Musk’s Twitter purchase and many of his moves since make a little bit more sense. For instance, the recent decision to adjust API policy in a way that bans Substack embeds limits site access to competing content platforms.
But this does potentially push one to go down the rabbit hole of Web2 vs “Web3.” If Musk walls off the platform to combat the robot takeover, Twitter looks a lot less like the public square of the internet and a lot more like a middleman giant fighting to maintain relevance. Or perhaps it requires a shift in perspective. Maybe Twitter was never actually the public square at all; the public square has always just been the internet itself. I think this gets us to a deeper question and I’ve asked it before; are consumers ready to pay to use social media?
I’ve been exploring this concept in this publication for some time. Facebook META 0.00%↑ is still free, as is Meta Platforms-owned Instagram. But it does seem like others in the industry are heading toward a pay-to-use subscription model rather than a free-to-use ad-based model. Pay-to-use is already the model for LinkedIn and it is increasingly becoming the direction Twitter is now going with features like Twitter Blue.
None of this should really be a surprise by now. I’ve been writing about how out of favor the ad-based model is among many content creators for quite some time. It’s interesting seeing the platform going this route as well. One has to wonder how much value Twitter will try to extract from content creators who launch publications and channels within the ecosystem. If it ends up being anything close to the 30% ransom Apple AAPL 0.00%↑ siphons from developers who use the iOS app store, I suspect Twitter may find a swift demise.
How valuable is the content on Twitter if half of the people leave when Elon inevitably asks for IDs to battle the bots? Only time will tell. Maybe a better question is can there be a different model entirely?
Nostr Is Admittedly Very Interesting
If, like me, you don’t have any interest in Facebook or Instagram, where do you go for microblogging or short posts if Twitter is no longer an option? Furthermore, is there anything out there that is truly censorship resistant? We’ve seen countless attempts at Twitter alternatives. I tried Gettr - it flopped in my view. I tried Flote - it didn’t survive. Maybe Notes is the answer? I’m much less sure of that but I definitely think it’s worth a shot to make that place more fun than it currently is.
While I absolutely love publishing through Substack, there is certainly no guarantee this content distribution model works either. I lean it will because it’s user-funded from the jump. But at the end of the day, Substack is also a walled garden. And while writers here may own their email lists, they don’t own the servers where the content is stored or the URL where the content archive lives. However, none of this means any other social media platforms need to be the answer either.
Jack Dorsey started Twitter. He somewhat notoriously departed that company and has since financially-backed Twitter alternatives like the invite-only Bluesky and the totally permissionless Nostr. The latter of which has been mentioned in the comments here on Heretic Speculator and is particularly interesting because of a quickly developing potential synergy with Bitcoiners. If you “get” Bitcoin, you’ll “get” Nostr.
Nostr is a censorship-resistant, decentralized network of users sharing communications online. However, where Bitcoin is a distributed ledger with each node possessing an identical copy, Nostr “relays” can pick and choose which users and messages they want to relay through the network.
The Bitcoin blockchain can be accessed from a number of different wallet applications. Nostr can be accessed from a number of different software clients. The two networks are similar in a several ways and when Twitter’s “rate limit exceeded” fiasco happened, Nostr made a six-month high in daily note events:
Of course, the big conundrum for Nostr relays is why do it? Why host content for strangers? At the beginning, Nostr relays lacked an incentive structure beyond hobbyist enjoyment. But that has seemingly changed. Nostr might solve a problem for Bitcoin and Bitcoin might solve a problem for Nostr. There’s a mutual benefit and a fairly clear alignment of ethos between user bases. The two networks seem destined to overlay with one another.
Nostr relays need an incentive structure to justify running a server. And Bitcoin miners like Riot Platforms RIOT 0.00%↑ and Marathon Digital MARA 0.00%↑ need block rewards to justify validating transactions. The problem for miners long term is the four year halving cycle. This means without higher BTC prices in perpetuity, miners need more than just new coin issuance to justify securing the network.
In early May we saw an apparent attempt at addressing this problem through the explosion of a Bitcoin-based NFT project called Ordinals. The result was Bitcoin’s transaction fees on mainnet were cost-prohibitive for smaller transactions but the benefit was transaction fees as a percentage of miner block reward absolutely skyrocket up above 70% for a brief period. Those fees have since come back down to earth but the point probably landed. Transactions absolutely most become a larger source of miner revenue or the network faces serious issues going forward.
Bitcoin miners need a robust fee market. And to attain that, we probably need to see greater adoption of Lightning Network. Nostr might be one way to organically grow Lightning adoption. Nostr relays get paid for server space and Bitcoin miners get paid to maintain the ledger on the base layer. Everybody wins, it would seem. Of course, all of this requires the end-user’s willingness to pay for decentralization and censorship resistance.
I don’t think we’re there… yet.
In case you’re wondering, I’m not on Nostr. And though I do genuinely hope it works out, I doubt you’ll ever see me there. I meant it when I said I prefer long form back in January.
Disclaimer: I’m not an investment advisor. I’m long RIOT.
Just a friendly discussion. Time will tell either way !
Is there really people out there who would pay for Facebook or Instagram? Amazing.