KEY TAKEAWAYS
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Social media sentiment might be predictive of voting outcomes for blockchain proposals and beyond.
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ATOM price increase follows the increase in user activity on X (formerly Twitter).
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Social media user activity also might play a significant role in voting outcomes.
It has long been theorized that there is a connection between user activity on social media platforms and the actual performance of blockchains, provided that the activity in question is related to said blockchains. As a hypothesis, it stands to reason since public sentiment is what eventually drives blockchain development and token prices, yet there was no actual data to support or disprove this notion. Until now, that is.
This article summarizes the main findings from the recent research paper written by Everstake’s R&D and data science experts Anna Petrenko and Ivan Pavlyshin, which explores the correlation between tweet sentiments and voting outcomes and APR in Cosmos Hub, one of the biggest and most complex blockchain ecosystems in existence.
COSMOS IN A NUTSHELL
Cosmos is a scalable and cross-network blockchain ecosystem designed to simplify development, deployment, and cross-blockchain interoperability, which aims to become the cornerstone of Web3. It addresses the isolation and incompatibility challenges among blockchains and offers a set of tools for secure and managed blockchain interaction.
Cosmos’ core technology is the Tendermint consensus, a Proof-of-Stake algorithm that enhances security and scalability. Cosmos also incorporates the Inter-Blockchain Communication (IBC) protocol, enabling various blockchains to exchange messages and values. The ecosystem’s central currency is ATOM.
SENTIMENT ON SOCIAL MEDIA
The original research sought to find out the exact ways and extent to which social media impacts the financial performance and governance of the Cosmos ecosystem. Specifically, it focused on X (former Twitter) since it is the most popular social media platform of choice for blockchain enthusiasts and professionals.
To explore the theorized impact, the researchers looked at the Twitter activity associated with two governance proposals in Cosmos: 797 and 88.
PROPOSAL 797
The proposal offered to increase the number of validators in Cosmos Hub from 175 to 180. The analysis covered over 100,000 tweets concerned with this proposal or Cosmos Hub in general to learn the prevailing sentiment using a specific mathematical model.
As a result, the sentiment of Twitter users concerning the proposal was as follows:
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Positive Tweets (66.43%): The majority of tweets had a positive sentiment, reflecting general support for the proposal.
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Neutral tweets (28.67%): A significant proportion of tweets were neutral, perhaps reflecting a neutral or reserved reaction to the proposal.
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Negative tweets (4.90%): A small proportion of tweets were negative, indicating limited opposition to the proposal.
Notably, 86.04% of voters eventually supported the proposal, which correlates with the percentage of positive and neutral tweets, considering the turnout during the voting period.
Interestingly, the majority of tweets received a relatively small number of retweets, averaging around 4.23 per tweet, and a significant number of tweets went utterly unnoticed, garnering zero likes. That said, there were a few outliers that managed to amass more than 100 retweets, indicating that while most tweets have limited reach, some break through and achieve widespread attention.
As a result, one can say that there is a strong correlation between sentiment and voting behavior, and therefore, social media sentiment might indicate the community perspective on blockchain development and, to some extent, be predictive of the voting outcome.
PROPOSAL 88
Proposal 88 was dedicated to raising the community pool rate from 2% to 10%. In this case, the community sentiment was somewhat different from that in the case of Proposal 797.
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54.55% of all tweets were positive
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35.84% were neutral
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9.62% were negative
The proposal ended up passing with 99.27% of votes, yet the turnout was below 50% at 47.7%. Therefore, one may assume that user activity also plays a significant role in voting outcomes.
What’s even more interesting is that there was a slight increase in the staked ratio right after the proposal was passed. Total stake and ATOM price also seemed to correlate with that: ATOM price increased with the growth of total stake, which, in turn, appeared to have a notable correlation with user activity and sentiment on Twitter.
Plainly speaking, this means that ATOM price and staked ratio may depend on user sentiment. That said, the existing data doesn’t suggest that this is necessarily the case since correlation does not mean there is an actual connection between events.
WHAT DOES IT MEAN FOR USERS?
The research strongly suggests that whatever happens on X (former Twitter) may have a direct impact on whatever happens in Cosmos Hub. By extension, we may even believe that this is also the case for other blockchains, such as Ethereum or Solana, although there is a need for further research for those assumptions to be conclusive.
Still, the discovered interrelation indicates that interactions on X (former Twitter) are not just a social activity but a factor that can have a powerful impact on the economic and operational dynamics of blockchain projects. With the growing influence of cryptocurrencies and blockchain technologies on the global economy, social networks, especially X (former Twitter), are becoming a key element in the decision-making system of blockchain projects.
What does it mean for regular users? There are several important lessons that we all should keep in mind when making decisions with regard to blockchain and crypto in general.
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Social media, particularly X (former Twitter), can be used as a means to gauge community sentiment and predict token price dynamics and governance vote outcomes.
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The same can be used to better understand the prevailing and upcoming trends in blockchain ecosystems.
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It is essential to deal with large arrays of tweets since many of them may go unnoticed, and isolated statements may be non-indicative of the prevailing sentiment.
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The same may be applicable to other major social media platforms such as Facebook, Discord, Reddit, and Telegram, yet there is no data so far to support or refute this assumption.
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Any relation between social media activity and blockchain performance should be taken with a grain of salt until more conclusive evidence is confirmed since, according to the prevailing scientific method, correlation does not necessarily imply causation.
Everstake’s researchers will continue exploring this promising realm to ensure that all assumptions are duly checked against real-life data. There is much to do in this area, yet the existing facts already point to an essential recommendation: if you’re interested in what may happen to a particular blockchain ecosystem, pay more attention to what happens on Twitter.
Read the full research paper: CODATA peer-reviewed journal.
