Web3 101: What Is SocialFi?

socialfi

In recent years, we’ve witnessed a rapid evolution in the way we interact with social media. What began as rather innocent beginnings with MySpace in the mid-2000s, where friends connected and posted on each other’s “walls”, has now morphed into today’s landscape where social media often carries negative connotations, synonymous with censorship, big tech overreach, and government involvement. Algorithms are crafted to hook users into consuming negative content and endlessly engage in a death spiral of scrolling.

Yet, amidst this, a new concept called SocialFi has emerged, blending social media with decentralized finance (DeFi), aiming to foster a more transparent, equitable, and user-centric digital social media sphere. This article explores SocialFi – what it is, its benefits, and how it shapes the future of social interactions and financial transactions.

What I socialFi?

SocialFi, an abbreviation for Social Finance, is a groundbreaking concept merging decentralized finance principles with social media platforms. It offers users unprecedented control over their data and content, while allowing them to monetize their interactions. Essentially, SocialFi represents the next phase of social media evolution, ushering in a decentralized ecosystem where users engage with platforms while reaping financial rewards.

It’s a response to the limitations of traditional Web2 social media platforms, which are centralized and profit-driven. In contrast, SocialFi platforms are decentralized, distributing control and decision-making power among users rather than concentrating it within a few large corporations.

Key Components of SocialFi

  • Decentralized Finance (DeFi): DeFi protocols lie at the core of SocialFi, facilitating decentralized rewards for platform participation.
  • Social Tokens: These unique tokens, native to specific social platforms, empower users to tip content creators, access premium content, and participate in platform governance.
  • Non-Fungible Tokens (NFTs): NFTs add value by representing digital assets, offering avenues for wealth generation and online engagement through buying, selling, and trading.
  • Decentralized Chat Functionalities: SocialFi apps integrate decentralized chat features, enhancing user experience and privacy.

Current Examples of SocialFi Platforms

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  • FriendTech: Allows users to create and monetize content for private groups who buy their “Key.” Many influencers and traders have used FriendTech to disperse higher quality information to those who are in their groups, opposed to giving away everything for free on traditional platforms with no subscription.
  • Fantasy.Top: A top trumps style card game featuring well-known characters within the “Crypto Twitter” sphere. Players buy cards of who they believe will perform best, with scores based on the engagement of their chosen Crypto Twitter accounts held in their decks.
  • Cipher: Emphasizes privacy and security. Users can post images which will be purchasable as cNFTs. Other users who “Like” the image can get a fractional share of the eventual sale price.
  • Hub3: Somewhat similar to FriendTech, Hub3 allows users to purchase and trade shares of their friends’ social media profiles.

Potential Benefits & Pitfalls

One of the most exciting aspects of SocialFi is the potential for new forms of monetization and value creation. By leveraging social tokens and other DeFi instruments, SocialFi platforms enable users to earn rewards for their content, engagement, and influence. This opens up new opportunities for creators, influencers, and regular users to monetize their online presence and build sustainable income streams.

Another benefit is empowering users to have a say in the platform’s development and direction, fostering a more collaborative and democratic environment where users shape the rules and norms governing their online interactions.

Despite its promise, SocialFi is still in its early stages, facing challenges like scalability, user adoption, and regulatory uncertainty. People generally are adverse to change; web2 social media is firmly established and will take a huge wave of support elsewhere to be dethroned. There is a chance also that the business model of these new SocialFi platforms end up running out of steam via lack of interest, which would result in their native tokens collapsing in price.

Final Thoughts

SocialFi is still in its infancy, having experienced numerous fluctuations in valuations and attention since its emergence. FriendTech, for example, started strong last summer but was declared “dead” shortly after in the fall of 2023, only to see a recent resurgence following its Season 2 launch and token airdrop in May. This indicates we’re still early in this movement’s lifespan, with many rises and falls, declarations of demise and resurrection likely before it finds solid footing beyond the crypto user bubble.

Until then, try out these apps, invest only what you can afford, and above all, have fun with them!

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