1
1
By Cynthia Corzo
A new FIU Business study shows crypto-economic rewards, incentives provided in the form of cryptocurrency tokens for specific actions, enhance the quantity and quality of user-generated content (UGC) on blockchain-based social media platforms, boost user engagement and, consequently, improve the overall activity of the platform.
Published in the September 2024 issue of Information & Management, the study explores the complex dynamics between reward mechanisms, content creation and platform valuation, offering insights that can help platform developers design better incentive structures for long-term user engagement and growth.
"It underscores the need for thoughtful financial and economic designs in digital environments, which can have substantial implications for the future of online communities and digital economies," said Florent Rouxelin, assistant professor of finance at FIU Business and one of the researchers.
More content means higher engagement for the social media platforms, which attracts users and increases its vibrancy. Content creators gain directly by earning cryptocurrency.
"It's a real financial incentive because you can convert the cryptocurrency into U.S. dollars," said Rouxelin. "This system provides tangible rewards for their efforts and enhances their visibility and reputation within the community."
The study examined the participation patterns of users on Steemit, a social media website that uses blockchain technology to reward user contributions with cryptocurrency tokens called STEEM.
Over time, as STEEM accumulates, it can be cashed out for normal currency.
The researchers collected data (blog posts and comments) from Steemit's launch on April 18, 2016, through Nov. 23, 2017. During that period, the website recorded 3,654,205 blog posts and 15,457,069 comments; delivered by 175,269 bloggers and 1,831,884 commenters.
One analysis of the data indicated that bloggers who receive cryptocurrency rewards are between 4.7 and 6.2 times more likely to engage in blogging activities compared to those who don't receive such rewards. It also showed that commenters receiving cryptocurrency rewards are 27.2 to 32.6 times more likely to leave comments on the platform versus those who don't.
While cryptocurrency rewards initially increase UGC, they don't necessarily increase platform valuations, explained Hemang Subramanian, associate professor of information systems and business analytics at FIU Business, who co-authored the research.
"Users quickly face competition from reward seekers, which initially increases UGC production but does not lead to sustained higher-quality content," he said. "As the number of contributors rises, the relative value of rewards earned decreases due to competition, and this, combined with token price fluctuations, creates a challenging environment for maintaining high-quality content."
Simply increasing token prices isn't enough.
"Our findings imply that carefully calibrated reward mechanisms are essential to sustain user engagement and content creation," said Rouxelin. "The overall reward structure must be managed to motivate users effectively without causing a decline in content quality or depleting the reward pool."
The study's results suggest that further examination of user engagement strategies and the scalability of reward mechanisms within blockchain platforms is necessary.
"There is more work needed to be done to ensure proper tokenomics design," Subramanian said. "It's a complex field and needs significantly more work to create and design a model of rewards that can satisfy all stakeholders involved."
