Without Sky: Social Media and the End of Reality

Social media promised to "connect the world." That promise has been broken again and again. People and businesses have been herded from one network to the next, their private thoughts and friend networks pilfered and abused. Now people are self-sorting onto platforms where they can minimize cognitive dissonance. This is being driven over time as these platforms are being used to advance the interests of their owners.

Recently, Democratic partisans have been flocking to the newest social media platform, Bluesky, in numbers that far exceed those garnered by other efforts by private companies in recent years. Post, funded in part by venture capital firm Andreessen Horowitz, held initial promise as the "serious" network for journalists and media outlets. But it was shuttered earlier this year, and users' investments in the platform were lost. Facebook's Threads has aspired to be a clone of the "old Twitter," but has struggled to grow, and Bluesky now eclipsed them all, attracting roughly 20 million users compared to X's 500-600 million.

But users migrating to Bluesky have been largely uncritical of the company's origins, funding, and business model. And casual users may have little reason to care — they just want to go where the vibes are good and get information that informs or entertains. Creators, however, are faced with the question of whether, and crucially why, to invest in yet another platform. Some, like writer Cory Doctorow, have said they've had enough, and that the incentives imposed by venture-funded social startups mean that all such efforts are doomed to failure at best, capture at worst.

Of course, it's not hard to see why people want to leave X, formerly Twitter. What began as a relatively congenial "town square" with a friendly blue bird logo and a moderation policy that reflected common-sense playground etiquette has been captured and transformed into something dark, partisan, and evil.

Jack Dorsey, its creator and off-again on-again CEO, went from visionary product guy to bearded guru obsessed with weird libertarian ideas. His cultivation and endorsement of Elon Musk as the "singular solution" to rescue Twitter has led to its transformation into X — the Pottersville of social media, at a time when people are hungry for something more like Bedford Falls.

Enter Bluesky

Back in 2006, Jack Dorsey conceived of Twitter as a protocol rather than as a company, similar to the protocols that are used to drive email and websites. Twitter started small, and implemented a developer-friendly toolkit that enabled novel applications. In fact, I was the first to use this toolkit (known as an API) back in 2007, and I got to know Jack and the rest of the founding team.

Twitter grew extremely slowly between 2007 and 2010, but then started to take off. And the default in San Francisco at that time was to throw money at anything that attracted eyeballs. Twitter thus grew into a venture-funded company with millions of users and all the attendant expenses: engineering, dev-ops, HR, moderation, legal, and customer service. Any plans to make Twitter a protocol and not a company would have to wait.

Twitter, Inc. grew in fits and starts, with boardroom drama and changes in leadership over the years, and Dorsey eventually returning as part time CEO. In 2019, he returned to the problem of building a social media protocol and launched a skunkworks entity to be funded by Twitter. It was to be called Bluesky.

According to reports, Twitter gave the Bluesky team a no-strings $13 million grant with a mandate to develop a decentralized protocol that could later be used to support a social media app. This is a bit like building the plumbing for a house, but without the house, and making the plans for the plumbing available to anyone who wanted to build on it.

By 2021, the company, under the leadership of founding team member Lantian "Jay" Graber (whose first name literally means "blue sky"), was ready to build an app. It launched in 2023 in Beta and began to grow. Earlier this year, in 2024, Dorsey left the company's board as Bluesky began performing content moderation.

Part of Dorsey's idea for a social media protocol was that it wouldn't need centralized content moderation. In fact, Community Notes on X began life under Dorsey as Birdwatch, conceived as another way to distribute the task of moderation, favoring more speech over censorship — a laudable, if naïve, approach. Centralized moderation and customer service would take Bluesky down the same path towards centralization taken by Twitter. The whole point of the experiment, for Dorsey, was to make something decentralized and federated, with much lower operating costs and thus less risk of capture and control.

The factors driving Bluesky's current growth are ease of use, a centralized Twitter-like user experience, and old-school content moderation. In the end, few care about the plumbing — they just want hot and cold running vibes, ideally from like-minded partisans. And Dorsey has hailed Musk's X as a "freedom platform," presumably because it supports Musk's push towards "free speech" and adoption of cryptocurrencies.

Bluesky's Funding

In addition to its initial $13 million grant from Twitter, Bluesky has raised an $8 million seed round in July 2023 and a subsequent $15 million Series A round in October 2024 — a total of $23 million.

The question stakeholders should be raising is what exactly investors expect from these investments. The initial funding by Dorsey was for his own personal pet project. The seed round, led by Neo, a Silicon Valley investment fund, included a variety of other investors who may have participated on the basis of Dorsey's involvement. The recent Series A round was led by Blockchain Capital LLC, a crypto-oriented investment fund, and partner Kinjal Shah has taken a seat on Bluesky's board.

Blockchain Capital was founded in 2013 by brothers Bart and Brad Stephens, along with influential cryptocurrency investor Brock Pierce. The company has since made significant efforts to distance itself from Pierce, even as both Bart Stephens and Pierce each separately confirmed in writing in 2019 that Pierce was a co-founder and also named the firm.

The company has raised at least ten different investment vehicles over the years. We reached out to the company to inquire which, if any, of these investment vehicles Pierce may hold equity in, and did not receive a response. Bluesky's CEO Jay Graber, however, did respond and said that "Pierce has never been involved in Bluesky in any way."

In 2023, Blockchain's Bart Stephens expressed frustration with the Biden regime, saying it is “no secret that the current administration has become overtly hostile to crypto by allowing Elizabeth Warren and Gary Gensler to decide what next-generation internet and financial technology will be available to Americans.”

He additionally expressed interest in leaving the US in search of more crypto-friendly regulations. Stephens said, “While the U.S. is offshoring blockchain technology innovation, other jurisdictions like the UK, the UAE, and Hong Kong are actively courting U.S. entrepreneurs and venture capital firms like Blockchain Capital. Crypto is a global industry and is based on the concept of decentralization so we are exploring decentralizing our financial and human capital."

Blockchain's most significant investment may be Coinbase ($75 million in its 2015 Series C), an influential cryptocurrency exchange.

In the 2024 election cycle, Coinbase bet big on candidates sympathetic to crypto interests, contributing at least $75 million, and pledging at least $25 million for the 2026 midterms. While most of the contributions went to support Republicans, they also supported some Democrats who pledged to support crypto.

According to the Wall Street Journal, Coinbase CEO Brian Armstrong recently met privately with Donald Trump to advocate for favorable treatment of cryptocurrency. The transition team just announced that it is vetting candidates for a White House crypto czar, suggesting that Trump sees crypto interests as vital.

Howard Lutnick, who has most recently led Trump's transition team and is also CEO of Wall Street trading firm Cantor Fitzgerald, has come under scrutiny for his deep ties to cryptocurrency firm Tether, which, like Blockchain Capital, was also co-founded by Brock Pierce. Trump has appointed Lutnick to his cabinet as his prospective pick for Secretary of Commerce.

Bluesky has taken pains to distance itself from Blockchain Capital's other investments, stating in its Series A press release, "we will not hyperfinancialize the social experience (through tokens, crypto trading, NFTs, etc.)," — clearly a question they expected to field as a result of Blockchain's participation.

Vague Business Model

So what does Blockchain Capital want from this investment? Bluesky's plans for revenue generation are nascent. They have partnered with domain registrar Namecheap to sell custom domain names for use with Bluesky and its AT Protocol — a feature most users don't use, preferring the simplicity of Bluesky's centralized screen name convention.

The company's Series A blog post also mentions future subscription options, which may seem like a reasonable source of revenue. But consumer "freemium" take rates typically hover in the range of 1-2%, and would likely be a meager revenue stream for the company, which has also suggested it would not pursue an ad-based model, saying it wanted to avoid having the "users become the product."

Bluesky has set high expectations for moderation and customer service and it is unclear whether such a standard can be maintained, especially as the company undergoes explosive growth and will likely be targeted by adversarial bots and trolls. Almost certainly, this will lead to the need for additional funding in the next few months. It is worth asking who, specifically, might be willing to pour money into such a venture, and on what terms.

Risk of Capture

This raises the question of what duties Blockchain Capital's Kinjal Shah may have as a dual fiduciary of both Bluesky and Blockchain Capital, and its myriad crypto investments in companies such as Coinbase. Instead of becoming the product, might the users become the target of political persuasion campaigns? In 2026, will Bluesky users be prompted to vote for crypto-friendly candidates? We should consider this possibility.

As Doctorow noted in his essay about why he's not joining Bluesky (or any other venture-backed platform), "no one is the enshittifier of their own story." And no team plans to be captured — it just happens. Like Doctorow, I have found that tech engineering and management teams genuinely care about creating great products, and about the users they are serving. Wisdom, however, is knowing that capital constraints often come first.

For several reasons, Bluesky has a target painted on its back. First, it has no plausible revenue model that can make it self-supporting anytime soon. Second, it is facing large and quickly-growing costs as it seeks to scale and fend off adversarial attacks. Third, it has attracted a fairly homogeneous audience of exhausted, well-meaning liberals that would be tempting to target for manipulation. And crucially, it already has a board member who has a fiduciary duty to serve a variety of crypto-related interests.

Mitigating Factors

Bluesky's advocates — there are many, and they are vocal — point out that it is built on the decentralized, open source "AT Protocol." And while a variety of interoperable services are sprouting around it, those services are not the ones featured in the New York Times with splashy photos of a likable CEO. The people want Bluesky, the centralized, easy-to-use Twitter clone where existing parasocial relationships can be continued. They're not looking to host their own servers or build new systems using the AT Protocol.

So as Dorsey concluded, Bluesky is effectively evolving as a centralized service. Until or unless there is a second company or concern competing with Bluesky using the same protocols and able to somehow fund its operations, it is effectively operating as a clone of Twitter, but with a very selective audience, and similar cost structures.

But alternatives do exist. Mastodon is an established federated social platform based on the ActivityPub protocol, and many users have migrated to it as an alternative to X. It's well-maintained and stable. But many users found the distributed model, which operates in a manner similar to email, confusing. They have become accustomed to centralized solutions like X, Facebook, or Gmail, and don't want to think about the realities of a distributed, federated social model. Indeed, this is exactly what has made Bluesky appealing as a drop-in replacement for X. And users have the last word when it comes to what they will adopt and use at scale.

Options for Creators

As Doctorow correctly noted, the reality is that no venture backed or corporate-owned platforms can be reliably counted on to have your interests at heart. And that's not because they aren't nice people or are plotting against you. The issue is structural, and rooted in investment realities.

For creators, the only way to avoid pitfalls associated with investors is to own your own platforms.

Substack, a popular choice for writers with a fairly open architecture, is funded by major crypto investor Andreessen Horowitz. Instead of Substack, I've settled on Ghost as a publishing platform (America 2.0) and Mastodon (Toad Social) for social media.

Creators should decide for themselves how and whether it makes sense to participate on platforms like Bluesky, while being aware of its current structural susceptibility to capture. For my part, I will distribute my work there, but will focus my efforts on building up long-term audiences on platforms that I own. This is wartime. People should adopt a wartime stance and assume that everything is subject to potential capture.

Another option is sez.us, which is being backed by a variety of longtime Democratic political operatives, including Joe Trippi. I've asked their team the same questions I've posed to Bluesky about how they intend to avoid capture. That venture is nascent and has raised far less money than Bluesky — under $2 million. But they acknowledge these concerns, and seem dedicated to building a prosocial environment. Sez.us can cross-post to X, for those looking to retain a presence there, and they also intend to interoperate with Bluesky, Mastodon, and other platforms. One central goal for the project is to unify individual identity in one place in an agnostic way, so people can correlate profiles across multiple platforms.

Many people have also found homes on other niche networks like Counter.Social, Spoutible, and Hive Social. I have found these platforms to either be too small to consider spending time on, or too opaque in their ownership and governance to recommend. Your mileage may vary. Gab and Truth Social perform similar roles on the right.

Jack Dorsey is also spending time on Nostr, a more distributed crypto-oriented protocol-based social app that is closer to his original vision for Twitter and Bluesky. However, it's relatively complex for users looking for a drop-in Twitter clone.

These divergent platforms divide us into ever-smaller realities, each catering to our own tastes while minimizing cognitive dissonance.

Without Sky

Years ago I read a short story by the surrealist Russian propagandist Vladislav Surkov, writing under the pen name Natan Dubovitsky, titled "Without Sky." It made a lasting impression. It describes a society so torn apart by war that people had become one dimensional and unable to trust their own senses. Worse, they had lost interest in doing so.

We are undergoing such a process at the hands of forces largely out of our control, but also voluntarily. We are dividing ourselves into an infinite number of factions, each with its own obsessions, grudges, and loaded language. Social media has taken our societies, which for decades operated with at least some semblance of shared reality and consensus, and has rendered them fractured, broken, restless, and barely able to communicate, much less agree on a shared agenda.

Democracy doesn't function under these conditions. Surkov and his peers have helped design the information warfare landscape we now inhabit. It is ironic that Bluesky, funded by crypto investors who want to destroy the Federal Reserve and the dollar, is known as "the good place" and the dying former town square is being called "the bad place." In fact, the only reliable reality is one you own and construct yourself, and the most daring gambit is simply to survive intact.

Of course X, the hellsite formerly known as Twitter, is for now a lost cause. People are understandably leaving in droves. However, users may wish to lock and preserve their accounts. First, to save any history they have they may wish to retain. Second, so that no one else impersonates you. Different users have different considerations here, so there is no one size fits all advice. However, Musk is not immortal, and this will not last forever. His creditors may well end up owning the site. Perhaps that will be a better situation. A post-Elon world is possible.

Notably, Musk has not made any mention of Bluesky and the exodus of some 20 million people from X. In the past, he has railed against Threads and Substack. This time... crickets. It's as if he has a plan in mind to use Bluesky to his advantage. Perhaps he intends to buy it. We don't know. Plan accordingly.

Conclusion

In summer 2023, Bluesky converted from public benefit LLC to a public benefit C corporation, a for-profit entity with a standard corporate shareholder structure, and a stipulation that shareholders cannot sue the company for choosing to pursue its public benefit mission over profit.

While the company has not shared the full text of its current mission recorded in its incorporation documents, it has generally stated that it is "to develop and drive large-scale adoption of technologies for open and decentralized public conversation." Delaware Public Benefit Corporations are required to distribute a report to shareholders about their progress towards its public benefit every two years, but are not required to make those reports public.

Speculation has already begun about when and on what terms Bluesky may need to raise more money to carry it through to 100 million users, at which time some believe a business model may materialize. But there are really only two reasons for firms to invest in Bluesky: because they think they will profit, or to effect a set of geopolitical outcomes. Both of these paths are fraught with hazards.

As new investors are brought in, the company may find its mission significantly altered. The company has declined to answer questions about its current capitalization table, or the identity of the current majority shareholder.

Blockchain Capital LLC has a fiduciary mandate to promote crypto-related interests, which is at odds with the politics of the largely MSNBC-liberal audience that Bluesky is aggregating. Donald Trump, Jr. and Musk are already "joking" about buying MSNBC from Comcast. It would seem to be only a matter of time until they consider bludgeoning Bluesky as well.

The Bluesky team should watch their backs as they take additional funds. Creators should consider whether they want to go through another potential round of boom, bust, and capture. And users, well... "caveat usor."

There are huge incentives to capture valuable assets like social media networks and media outlets. People concerned with defending democracy should assume they are operating behind enemy lines.

End Notes

We have included additional background information relevant to this story below. We are awaiting responses from Bluesky and Blockchain Capital on some questions. While Bluesky did respond to an initial inquiry, we have not heard back from Blockchain at all. We will update this story as new information becomes available.

See also:

"No, Elon and Jack are not “competitors.” They’re collaborating."
by Dave Troy, October 29, 2022.

Have tips or additional information relevant to this story? Contact Dave Troy.