Résumé
SocialFi combines the principles of decentralized finance with social networks. It empowers content creators by giving them control of 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 achieve mainstream adoption, SocialFi platforms must overcome two major challenges: scalability and economic sustainability.
The main promise of SocialFi is to make the social media landscape more transparent, fairer and more user-centric.
Web3 and social networks
Originally, Web3 aimed to return ownership and sovereignty of data to users rather than centralized companies. This shift in ideology has already impacted sectors such as cross-border payments and finance. However, this move from Web2 to Web3 could be a game-changer in the social networking sector. Imagine a social media platform where users:
Have greater control over their data with a central organization acting as a mediator.
Can save fees since they donât need an intermediary to process transactions.
These ideas gave rise to SocialFi: the âWeb3 versionâ of a social networking platform.
What is SocialFi?
SocialFi is a portmanteau of âsocial mediaâ and âfinance.â The basic principle is to allow users to interact with each other on a social media platform, in which the interactions themselves are monetized. Think about how Patreon works. As a content creator, you can restrict access to your content to paying users. SocialFi users work on the same principles, except for one significant difference: content creators can interact directly with their users without going through a centralized intermediary. Here are some elements of a SocialFi platform:
Digital ownership of exclusive content is determined by NFTs.
Decentralized Autonomous Organizations (DAOs) are responsible for the governance of the protocol.
SocialFi vs. DeSoc
SocialFi and Decentralized Social Networks (DeSoc) certainly share many points in common, but they diverge on one key point. SocialFi focuses on monetizing social interactions, much like the difference between Patreon and Instagram. Although both platforms host content and engage their audiences, the main intention behind each is different: one focuses on monetary transactions and the other on social interactions.
Why is SocialFi necessary?
Social networks have profoundly changed the way we communicate, share and monetize our interactions. However, current Web2 platforms do not allow individuals to truly emancipate themselves. They centralize control, dilute individual brand value, and raise questions about censorship, privacy, and monetization of data.
SocialFi is deeply rooted in the core values ââand principles of Web3. It redefines online social interactions by introducing social tokens linked to individual brand value. Users are no longer passive participants in a platformâs revenue model. Rather, they can tangibly monetize their influence, engagements, and content. This tokenization shifts the balance of power, placing control and value in the hands of individual contributors rather than centralized entities. âSocial capitalâ is no longer an abstract measure. With social tokens, your social capital can now be calculated and used.
SocialFi bridges the gap between personal branding, content creation and commerce in a decentralized digital age. It promises a more equitable, transparent and empowering social ecosystem in which individuals are recognized, rewarded and have power over their online presence and interactions.
Beyond monetization, SocialFi addresses the ongoing tension between freedom of expression and censorship. By promoting decentralized curation, content moderation becomes a collective responsibility, democratizing the process and reducing the potential bias of centralized systems.
Popular SocialFi Projects
Let's review some popular SocialFi projects.
Friend.tech (BASE)
Friend.tech is a new decentralized application on Base, allowing creators to capitalize on their content via social tokens. The unique âkeyâ system, symbolizing shares, provides exclusive access to a creatorâs private chats and other unique benefits.
As Friend.tech evolves, it promises to revolutionize creator-community interactions, although due diligence is essential given its relatively recent launch. Friend.tech can be considered the biggest SocialFi project currently, if the hype it has generated is anything to go by.
Stars Arena (Avalanche)
Stars Arena is a Web3 platform on the Avalanche network that allows users to monetize their content by linking their X (formerly Twitter) accounts and trading via 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 challenges. An exploit earlier this week resulted in a loss of $2,000, although the issue has apparently been fixed.
What are the benefits of SocialFi?
Here are some of the benefits of SocialFi.
Decentralized storage: All SocialFi data is stored on the blockchain. This ensures that your data will not be misused by a centralized entity. This significantly reduces the risks associated with personal data leakage and potential misuse.
Token Rewards: Content creators and regular users can earn token rewards for engaging and sharing content.
Tokenization of attention: Users are incentivized to produce high-quality content that generates attention and interactions.
Content Ownership: Users retain ownership rights to their content, addressing concerns about losing rights to the materials they upload.
Protection against âdeplatformingâ: Because governance is managed by a DAO, there is less risk of sudden âdeplatformingâ due to the whims of a single entity.
Freedom of expression: By mitigating censorship concerns, SocialFi platforms can become essential tools for upholding freedom of expression and data protection.
What are the challenges of SocialFi?
Here are some obstacles that could prevent the mass adoption of SocialFi applications.
1. Scalability
Social networks like Facebook and X have invested millions of dollars in servers and databases capable of handling enormous amounts of data. Facebook processes millions of comments, statuses, and photo uploads, generating approximately 4 petabytes of data per day. So how can Web3 social media applications manage so much data without centralized intervention? To address this issue, developers are experimenting with various scalability techniques, such as sharding and off-blockchain storage.
2. Sustainability
To gain a large number of users, SocialFi platforms have offered attractive token rewards, which are not sustainable in the long term. If the idea of ââtokenizing social capital is very innovative, the fact remains that the value of these tokens is always linked to the actions of the influencer. For example, a negative post from an influencer could cause the value of their associated social tokens to drop, potentially creating a negative feedback loop.
ConclusionÂ
SocialFi represents a transformative change in the social media landscape, merging the principles of decentralized finance with social media. At its core, it seeks to empower users, giving them control over their data, ensuring true ownership of content and offering direct monetization opportunities without intermediaries. Although platforms like Friend.tech and Stars Arena are at the forefront of this movement, the journey is not without its challenges. Scalability concerns in the decentralized domain and the sustainability of business models are relevant questions. Nonetheless, SocialFi's promise of a fairer and more transparent digital social space, where users can truly capitalize on their social capital, signals an exciting shift in the way we view social interactions online and which we are committed to.
More information
What is Friend.tech?
What is data tokenization and why is it important?
Web2 vs. Web3: Which is better?
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