It has failed because it is in the hands of centralised entities and platforms, not of the creators of investment strategies and ideas themselves. It can never give creators the control and incentives needed for it to truly take hold and dominate retail investing. Only web3 can and only a truly creator-centric application of it.

The web3 version might only seem subtly different on the surface at first, but it is built on fundamentally different infrastructure that will make it take on a new form entirely. It will have all the key elements that are missing from web2 social trading and which made it predestined to fail. It won't just level the playing field between Main Street and Wall Street, it will rewrite the rules of the game. And it won't be called social trading or copy trading.

It will be called AlphaCapture. Anyone will be able to prove performance of their investment strategies and monetise them. Anyone will be able to access strategies on-chain from creators with a proven performance record and automate application of the strategies to any brokerage or exchange account, or self-custody wallet they want themselves, using, Distributed Individual Investing: 'DIY copy trade' on steroids. AlphaCapture won't stop at retail investing either; Distributed Investment Management will follow. This won't just be an incremental increase in investor choice or control, it will be a new way of investing that will represent a fundamental shift in the balance of power away from institutions, to investors and creators.

This is the 'social trading revolution' that is still to come - the Distributed Investing Revolution - and it will be spearheaded by putting creators in control and proving alpha. It's an exciting time to be a creator of investment strategies.

Social trading was - it still is - a worthy experiment, but the odds were always stacked against the web2 version succeeding. Many companies have tried over the course of the last decade, some with more success than others. From investing specific services, such as copy trade brokerages and exchanges, social trading apps and communities, financial content sites and trading bots, through to social media platforms for sharing any kind of content, all ultimately encounter the same set of challenges. Trying to solve these within a web2 framework will only ever lead to a dead end.

The single most pivotal factor impeding the success of social trading in web2 is the lack of creator independence. Creators are wholly dependent, even if it might not seem that way.

One of the core elements of creating, whether it's a piece of art, writing, music, or an investment strategy, is the (almost emotional) sense of ownership you intrinsically feel for what you have originated. If you create investment strategies and share these online today, whether on a social media channel, copy trade brokerage, social trading community etc., you probably see this as your data, but, in reality, it's not. The platform or site in question owns the data, not you. In fact, there is a lot that you don't own as creators in web2. You don't own your investment ideas, your users, your performance record (if you have been able to create one), your business model, or control over who can access your ideas and how.

If you were to set up a new business, you'd look carefully at your IP, your data, your revenue model, your users etc. You wouldn't just freely hand this over to a third party to own. Well, as a creator of investment strategies, you probably already have. What happens if the company that runs the social trading site, on which you share all your ideas and have built up a considerable following, goes under? What if you were also using this site to prove your performance? What happens to your hard worked for track record and how do you prove it now?

As a creator, if you are proving your performance in web2, you're probably in the minority, because it's hard to do. You'll likely need trading capital (not something everyone has), have to link your brokerage account to prove your positions, share sensitive data, or audited records, retrospectively and at a cost. Even if you are able to prove your performance, do people really trust it anyway? Do you trust someone bragging on X about how much they made on Bitcoin? Are you sure the pdf of audited trading account performance shared with you hasn't been altered at all? How do you know for sure?

The drive to prove performance also assumes that there is a strong incentive to do so and that your potential earnings as a creator are directly correlated to your performance, but this is often not the case. Granted, you cannot become a 'copied trader' with a copy trading brokerage or exchange, without proof of your performance, but this is certainly not the case on social media platforms.

These platforms are designed for sharing any kind of content and are not dedicated tools for creators of investment strategies - the platforms themselves offer no means to prove your performance. Creators earn revenue from advertising, promotions and affiliate programmes. There is no connection between revenue and their proven investment performance, even if they are making explicit recommendations to invest in a specific asset or to promote a particular company. Take 'Meet Kevin', Kevin Paffrath, as an example, who earned $289k from FTX endorsements and is now a defendant in a class-action lawsuit brought by a group of investors against YouTube influencers, who promoted FTX.

Now, there are plenty of regulations on Wall Street to prevent those types of conflicts of interest from occurring, but not yet on the Main Street social trading world, where the reach of finfluencers is significant. The top two finfluencers alone have a collective following of 81 million. That is more than three times the size of the following of the top 20 US banks combined.

Regulatory scrutiny of finfluencers is increasing and whilst creators don't always have an incentive to prove their performance today, it is inevitable in the near future that creator earnings will be linked to the quality and performance of their ideas. Investing is all about performance, after all. Wall Street knows that and a finfluencer would be outright laughed off the trading floor, if they couldn't back up their ideas with a track record of performance; something that some areas of social trading seem to have lost sight of.

Having the right incentives is key to the success of social trading. On Wall Street, if your ideas are good and they make money, people will pay for them. And you will be rewarded well, potentially really well.

On the other end of the earning spectrum to social media platforms are the dedicated social trading communities, the vast majority of which invite creators to share their ideas for free. Beyond leaderboard accolades, social media shout outs or a boost to your ego, there is very little incentive to spend significant time and money sharing your ideas and potentially proving your performance too, when you're not going to be rewarded in real dollar terms for it.

Creators are fundamental to the successful functioning of these social trading communities, just as sellers and buyers are to a marketplace. People are coming to these communities for two reasons - to share their ideas or to source ideas. People share their ideas because they think they are good and because they want to have good ideas shared with them in turn. People want to source good ideas, so that they can make money. Where is the economic incentive that will enable these communities to retain their creators and survive? If the pool of creators dwindles, the community has a problem. It needs its atomic network of creators to attract investors sourcing ideas and to thrive.

The barriers to entry for creators remain high, however, even though the rewards are limited. Even on sites where you can earn revenue as a creator for sharing your ideas, not only do you not set the business model, you also don't set the entry criteria. To be a contributor to some of the financial content sites or to be a copied trader can be an involved and lengthy process. It's no small commitment, particularly if your reward is being paid small sums for newsletters or trading room subscriptions, or you have a full time job elsewhere. And it's just limiting. What if your ideas might be making someone else a lot of money, far more than you're earning by sharing them? Is there not a better way?

Creators that earn from having their strategies copied seem to have more attractive revenue incentives. For social trading services to enable creators to have their strategies copied, there are only two options today. The first option is to be regulated and authorised to automate copy trading, either by being a brokerage, such as eToro or ZuluTrade, or by effectively acting as one, by using an embedded brokerage solution, such as Alpaca, as used by Follow or Shares, for example.

Whilst copy trade brokerages do offer creators more earning incentives than sites inviting creators to share ideas for free - you're typically paid a percentage of assets under copy - their ultimate goal is not to empower and enable creators, rather it is to keep creators in their ecosystem, at all costs. They have no incentive to help creators reach their followers or subscribers on any other channels than their own. So, for a creator, reach and, therefore by extension, earnings are always limited to the size of the brokerage's own ecosystem.

The second option is for a social trading service to offer its users connections to brokerages. Firstly and most importantly, there is no direct earning model for creators here, or the social trading services themselves, because they are not regulated entities. Automated copy trade is therefore out and so investors need to do the copying themselves; a very different and much less attractive user proposition, particularly when you think about time sensitivity of placing trades.

Secondly, integrating with brokerages and exchanges, which often have quite dated APIs and were, for the most part, never built to serve as a like for like substitute for their own apps and platforms, is (and we know, from experience!) fraught with problems that makes it challenging to offer a consistently great user-experience. Solving the API challenges ultimately sits with the brokerages and exchanges and is beyond the control of social trading sites. The technical effort to integrate with and support that many brokerages and exchanges is significant and it becomes a beast to manage.

Offering copy trade is no small undertaking for a social trading service, particularly when you take into account that, whilst people have become more comfortable with linking their bank/checking accounts through Open Banking and Open Finance, linking your brokerage account, sharing sensitive trading data and enabling trade execution is still a much bigger leap for people and uptake has been slow.

All this skips over one inherent contradiction in the web2 social trading landscape. For all the platforms that call themselves social trading communities, their primary client is actually the retail investor sourcing ideas, not the creator of ideas. For copy trading brokerages and exchanges too, their primary goal is not to reward creators or 'copied traders', but for creators to be a way to attract more retail brokerage clients - that's where they make their money. The majority offer copy trading for free for a reason.

A lot of social trading communities have a core product, which is where they make their revenue, whether that be charting or portfolio management, for instance, and social trading is just an add on. It's part of their marketing and it sometimes exists more in name only than in reality. These aren't examples of services where you 'come for the tool, stay for the network,' because the long-term value being created for users is in the tool - they're using the tool for their individual investing. They're not using it to engage with the network. By primarily focusing, not on the creator, but on the retail investor sourcing ideas or coming to the service to use other core products, web2 social trading is slowly starving its nucleus.

Getting social trading right has to benefit both creators and investors. They're integrally linked - one side doesn't exist without the other. Take an institutional example of 'social trading', TIM Group, 'the world's largest trade ideas network' where the sell side (creators) contributes alpha and the buy side (investors) pays the sell side for its good ideas. No one contributes their good ideas on Wall Street for free. The only reason creators on Main Street share their ideas for free in web2 today is because there has been no accessible, affordable, scalable solution with an explicit monetisation model. On Main Street, there is no alpha capture.  The virtuous cycle stops at idea generation.   What there is, is a lot of noise.

The explosion of ideas and information shared across the spectrum of social trading also isn't as helpful for retail investors as it might initially seem. The majority of retail investors are looking for ideas to achieve returns that will enable them to build wealth and fulfil their most important goals and dreams. That's no small thing.

For the most part, as an investor on Main Street, trawling through social trading communities, financial content sites and the constant stream of content from finfluencers, Redditors, TikTokers and YouTubers etc., your options to see proof of performance before deciding to follow or copy someone's ideas are very limited. Yes, on copy trade brokerages and sites that allow creators to link their brokerage accounts, you can, but you often can't see raw performance or compare like for like. Does the creator's performance look fantastic because they are using 5 x leverage and have 10 x more trading capital than you?

When there is no independently verifiable proof, how do you filter out the noise and see who is the real deal? No one invests in institutional world without proof of performance. No one. As an investor, why would you? For a start, it's an established industry standard, but why would you trust the firm who can't or who doesn't show you a performance record vs. the one that can and does?

A new research paper by the Swiss Finance Institute and co-authored by UC Berkeley researchers found that the finfluencers on Twitter with the largest followings typically had the worst returns. Conversely, those finfluencers with better returns have fewer followers. Research has also shown that, similar to in person relationships, people feel a more personal connection with people on social media, even if they don't know them, than they typically do with institutions, which creates a greater sense of trust. People also tend to seek out or be attracted to those who are similar to themselves, resulting in social media users tending to match with finfluencers who are not experts.

Whilst the expected outcome of social media and social trading communities bringing together large groups of individuals is that the speed of learning and information diffusion should improve, the converse is instead true - it means a reduction in the pace of learning and knowledge dissemination on the platform. This is not good for retail investors. If they cannot access proven investment strategies, it is ultimately harder for them to build wealth and so the wealth gap continues to widen. It is not good for creators either, because it doesn't do anything to credit the overall sector.

For as much as web2 social trading has failed, the explosion of investment information on social media is here to stay. In our connected, always on, mobile world, there has been an irreversible generational shift towards people sourcing their investment ideas online - 60% of 18-34 year olds now source their ideas online, according to a recent report by the FINRA Foundation NFCS.

Regulators across the globe, some to a greater extent than others, recognise the broader benefits of finfluencers sharing content and demystifying investing (once only the preserve of the already wealthy) and making it more accessible to more of the population. Whilst they don't want to stifle this growth - it would be anti-democratic and anti-innovation - they need to fulfil their role in protecting retail investors and in encouraging the right behaviours.

Some are focusing first on regulated firms' engagement of finfluencers to promote their products, such as the US, where its Financial Industry Regulatory Authority (FINRA) issued guidance to its member brokerages to increase scrutiny and controls when working with finfluencers. Some have gone more hard-line and made it prohibitive for finfluencers to share their ideas online without being registered advisors - Australia - and others are taking a more creative, forward-looking path, such as the UK. Recently, the UK industry regulatory body, the Financial Conduct Authority (FCA), employed a well-known social media celebrity, to educate finfluencers about the obligations and risks they face. Whilst education absolutely has an important, broader role to play, what it still won't do is show which creators are the real deal and which aren't. Only proof of performance that can be trusted by anyone can do that.

It's hard to see how any web2 social trading solution could overcome all these obstacles. All the web2 solutions are centralised, platform centric and ultimately designed to benefit the entities themselves. They offer low creator control and low creator incentives. Creators don't own what they create or their users, there are high barriers to proving their performance, limited ways to earn and low potential rewards. Creators cannot do what has always happened on Wall Street - you create a good investment strategy, prove your track record of performance and you are rewarded.

The successful new version of 'social trading' needs to be creator centric, give high creator control and high creator incentives, so creators can simply prove performance and earn. This is only possible in web3 where you remove the need for centralised entities.

There are some emerging web3 social trading options out there, but even though web3 in name, they are still applying web2 thinking and principles. Creator control is a bit higher, but creator incentives remain low. A bit of web3 alone is not enough, you have to use everything that web3 has to offer to put creators at the centre of the solution, to truly empower them.

People often think of web3 and decentralisation as being anti Wall Street and in many aspects they are, but the basic principles of Wall Street actually have an important role to play in informing web3 distributed investing, and in its ultimate success.

On Wall Street, a firm's ideas are proprietary by default. Firms create investment strategies so they can make money for and earn money from their clients. They need to prove their performance record to secure the trust of their clients, so proof of performance is an everyday part of their business and integrally linked to their earnings. They have the trading capital, full alpha capture systems, people and budget to do so. The individuals who are responsible for contributing alpha and creating high performing strategies are valued and rewarded really well. If a firm performs well for its clients, its clients trust them and invest more money with them. It's a virtuous cycle and on it goes. This model has been in place for a very long time, because it works.

Many of the successful new retail investor offerings that have appeared in the last decade are all trying to do one thing - take what exists and works on Wall Street and create a version for retail. From charting, research, data and analytics services, through to portfolio management or no code algo platforms that allow investors to generate their own trading ideas and strategies, all these services are trying to make tools that were previously only available to institutions and professionals, accessible to retail investors. A successful version of alpha capture is no different.

Web3 applies some Wall Street rules already. Trust in a system is really important. Whereas in the majority of social trading communities, creators contribute their ideas for free, if you look at cryptocurrency transactions and blockchain, the integrity of the blockchain relies on the Proof of Work, Proof of Stake (and other less well known) consensus mechanisms that give the miners and validators incentives to validate transactions. What would the blockchain be like if everyone were able to participate for free? Would you trust it then? Creator incentives to earn are no less key to trust in the whole social trading system.

Everything you can't do in web2 as a creator, you can in web3. You own your ideas, your data, your users and your performance record. You can encrypt your ideas. You control who can access them, how they access them and on what channels. You own your business model and can charge for access to your ideas, to share them or to enable them to be copied in a distributed way. It is easy to build a performance record - it's accessible, affordable and scalable. It's all on-chain, independently verifiable and trustless.

If you follow the Wall Street model, the incentive to prove your performance is clear - the better your performance, the more you can charge and the more people want access to your ideas. It's better for investors too - they can access proven investment strategies and make informed decisions about how they invest their money, making it easier for them to create and grow wealth. By putting creators in control, control is passed to investors in turn and everyone benefits. It is also the perfect solution for regulators, who are concerned about protecting retail investors from being exposed to false or misleading information; a new industry standard - trustless proof of performance. It opens up a different world.

AlphaCapture is a dApp for creators of investment strategies. We enable you to tokenize your investment strategies as encrypted non-fungible tokens (NFTs), so you can build a trustless performance record anyone can trust and sell real-time access to your strategies, at a price you set, correlated to your performance. You own your data, your users and control access to your ideas. We cover all asset classes and you can use all our tools on your own application or site, as well as on ours, so you can reach your audience your way. Your subscribers can automate your strategies to any brokerage or exchange (centralised or decentralised) account they want, using our Distributed Individual Investing tools.

We want to give you high control and high incentives, so that you have complete independence and unlimited potential rewards. Anyone should be able to create an investment strategy, prove their performance and be rewarded for it. We want your performance to be able to do the talking for you and open up new opportunities. The next best investment strategies could come from Main Street and you no longer have to work on Wall Street to be rewarded for them.