Brief content

  • SocialFi combines the principles of decentralized finance with social networks. This technology empowers content creators by giving them control over their data and allowing them to interact directly with their users.

  • Key features include tokenized social capital, blockchain-based data storage, and governance through decentralized autonomous organizations (DAOs).

  • To gain mass adoption, SocialFi platforms must overcome two major challenges – scalability and economic sustainability.

  • SocialFi's core vision is a more transparent, fair and user-centric landscape of digital social networks.

Web3 and social networks

Essentially, Web3 aims to return data ownership and sovereignty to users instead of centralized corporations. This change in ideology has already affected sectors such as cross-border payments and finance. However, this transition from Web2 to Web3 could dramatically change the landscape of social networks. Imagine a social network where users:

  • Have more control over their data with a central organization acting as an intermediary.

  • Can save on fees because they don't need an intermediary to process transactions.

These ideas are the basis of SocialFi - the "Web3 version" of the social networking platform.

What is SocialFi?

SocialFi is a combination of the terms "social networks" and "finance" (from the English "social media" and "finance"). The basic principle is to allow users to interact with each other on a social media platform while monetizing those interactions. Remember how Patreon works. As a content creator, you can only make your content available to paying users. SocialFi users work according to the same principles, with the exception of one significant difference - content creators can directly interact with their users, without resorting to a centralized intermediary. Here are some elements of the SocialFi platform:

  • Digital ownership of exclusive content is determined by NFT.

  • Decentralized Autonomous Organizations (DAOs) are responsible for managing the protocol.

SocialFi and DeSoc

SocialFi and decentralized social networks (DeSoc) certainly have a lot in common, but they differ on one key point. SocialFi focuses on monetizing social interactions, similar to the difference between Patreon and Instagram. While both platforms host content and engage audiences, the primary purpose of each is different: one emphasizes monetary transactions while the other emphasizes social connections.

Why is SocialFi technology needed?

Social media has fundamentally changed the way we communicate, share content, and monetize our interactions. However, current Web2 platforms are unable to truly unlock the potential of users. They centralize control, erode individual brand value, and raise questions about censorship, privacy, and data monetization.

SocialFi is deeply rooted in the core values ​​and principles of Web3. This technology redefines online social interactions by introducing social tokens linked to individual brand value. Users are no longer passive participants in the platform's revenue model; instead, they can tangibly monetize their influence, engagement, and content. This tokenization shifts the balance of power, placing control and value in the hands of individual participants rather than centralized entities. "Social capital" is no longer an abstract metric. With social tokens, your social capital can now be actually calculated and worked with.

SocialFi bridges the gap between personal branding, content creation and commerce in the decentralized digital age. They promise a more fair, transparent and fulfilling social ecosystem in which people are recognized, rewarded and held accountable for their online presence and interactions.

Beyond monetization, SocialFi eliminates the battle between free speech and censorship. By promoting decentralized governance, content moderation becomes a collective responsibility, democratizing the process and reducing the potential biases of centralized systems.

Let's take a look at some popular SocialFi projects.

Friend.tech (BASE)

Friend.tech is a new decentralized application on Base that allows creators to monetize their content using social tokens. The unique "Keys" system, symbolizing shares/shares, offers exclusive access to private creator chats and other unique bonuses.

As it develops, Friend.tech promises to revolutionize the interaction between creators and the community, although due diligence is important given that the project is in its early stages. Friend.tech can be considered SocialFi's biggest project to date, purely due to the amount of publicity it has generated.

Stars Arena (Avalanche)

Stars Arena, a Web3 platform on the Avalanche network, allows users to monetize their content by linking their X accounts and trading with AVAX. As a fork of Friend.tech, Stars Arena also allows influencers to monetize their fan base by offering exclusive content.

Despite its growing popularity, Stars Arena has not been without its problems. The exploit earlier this week resulted in a loss of $2,000, although the issue has reportedly been resolved.

What are the benefits of SocialFi?

Here are some of the benefits of SocialFi.

  • Decentralized storage: All data in SocialFi is stored on the blockchain. This ensures that your data will not be used by a centralized authority. And this significantly reduces the risks associated with the leakage of personal data and possible misuse.

  • Token Rewards: Both content creators and regular users can receive token rewards for interacting and sharing content.

  • Tokenization of attention: Users are incentivized to create high-quality content that attracts attention and engagement.

  • Ownership of content: Users retain ownership of their content, addressing the possibility of losing rights to the materials they upload.

  • Ban Protection: Since the DAO is in charge, there is less fear of being suddenly banned from using the platform due to the whims of a single organization.

  • Freedom of speech: By mitigating censorship issues, SocialFi platforms can be vital tools to support freedom of expression and data protection.

What are the challenges for SocialFi?

Here are some of the challenges that could hinder the mass adoption of SocialFi apps.

1. Scalability

Social media platforms like Facebook and X have invested millions of dollars in servers and databases that can handle massive amounts of data. Facebook processes millions of comments, statuses and photo uploads, generating about 4 petabytes of data every day. So how can Web3 social networking applications handle so much data without centralized intervention? To solve this problem, developers are experimenting with different scalability methods, such as sharding and off-chain storage.

2. Stability

To attract a large number of users, SocialFi platforms offer tempting token rewards that are not acceptable in the long term. Although the idea of ​​tokenizing social capital is very innovative, the fact remains that the value of these tokens is still tied to the influencer's actions. For example, a negative post by an influencer can lower the value of the social tokens associated with it, potentially creating a negative feedback loop.

Results

SocialFi is a transformative shift in the social media landscape, combining the principles of decentralized finance with social media. At its core, this technology seeks to empower users by giving them control over their data, ensuring true ownership of content and enabling direct monetization without intermediaries. While platforms like Friend.tech and Stars Arena are pioneering this movement, there are challenges along the way. The problems of scalability in the decentralized domain and the sustainability of economic models are relevant. However, SocialFi's promise to create a fairer and more transparent digital social space where users can truly leverage their social capital represents an exciting evolution in how we perceive and engage in online social interactions.

  • What is Friend.tech?

  • What is data tokenization and why is it important?

  • Web2 or Web3: which is better?

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