Preamble
Are we safe in the era of information technology development?
In the morning of a day like any other, Musk sat and munched bread at a familiar roadside restaurant after taking his children to school. The phone rang, causing Musk to temporarily put the bread on the table to answer. It was a call from an unfamiliar number, on the other end was a cute girl's voice: Is Mr. Trinh Van Musk on the phone, right? Trinh, calling me from The Gioi Securities Company, ... bam, bam, Musk turned off the phone with disdain in his eyes and continued to eat bread.
A minute later, the phone continued to ring. Musk answered the phone, the man got straight to business: Hello, is Mr. Trinh Van Musk with citizen identification number 123456789 residing at 101 Tay Ho, right? I called you from the High-Tech Crime Prevention Department to ask you to work on some issues related to fraud.
It took a few seconds for Musk to calm down and realize the problem. But… the question echoing in his mind was, why do scammers have such detailed information about themselves? Will people ever come to where I live to bother me?
This story is certainly not strange to any of us. It seems humorous but raises a concern about personal information security.
In 2018, the "Facebook-Cambridge Analytica" information leak became a major event in the technology industry. Information of about 87 million users was stolen for "political advertising" purposes. Cambridge Analytica uses this data to create user profiles, then manipulate the information to influence electoral action.
“In the current age of information technology, digital media is a powerful weapon. But sadly, those who use weapons consider our personal information as bullets to discharge mercilessly.“
As society continues to develop, the community also realizes that we have the right to privacy, the right to security and to benefit from the information we share. And blockchain is the perfect combination for this problem.
In the next sections below, we will learn about a new economic model SocialFi, where Social Media and Decentralized Finance converge together.
If you haven't read parts 1 and 2, you can read them again here: Part 1 - LSDfi | Part 2 - Layer 2
SocialFi - The future of social networks and hope for information security.
What is SocialFi?
SocialFi is a compound word of Social Media and Decentralized Finance, it refers to social media systems that integrate decentralized finance. This integration will help them inherit all the good properties of DeFi:
Decentralized - Decentralized
Immutable - Immutable
Transparent - Transparent
Permissionless - Permissionless
No need to trust - Trustless
Self-Custody - Self-Custody
The benefits that SocialFi brings
Security and privacy
As for traditional social networks, data is stored in the data center and completely controlled by the developer. Not to mention, whether or not this data source is used for unwanted purposes, there is still a risk of it being stolen, if the security system of that development unit is poor.
When built on a blockchain system, users' personal data will take advantage of decentralization and network security to minimize data security risks.
Next, this data is completely under the user's control, if and only if the user allows new protocols to be used.
It can be seen that Blockchainization of Social helps it enhance information security and privacy for users.
Although it cannot completely solve the problem in the opening example of Trinh Van Musk, SocialFi also helps minimize the risk of information theft from Social.
Freedom of speech
Freedom of speech is one of the basic human rights. This right refers to the ability of each person to express opinions, convey information, and express his or her views without restriction or hindrance by any third party.
However, you probably know how strictly controlled the content posted to the media is. With unwanted content, a light result is reduced interaction, a serious result is removal or worse, account lockout.
In some countries, content censorship on the internet is extremely strict. For example, in China, they have something called the "Great Firewall" used to control all content posted to the internet in the country, it also allows or does not allow people to access certain websites.
The above problems can completely be solved with SocialFi. With decentralization, immutability, transparency and no permissions, anyone has the freedom to speak their mind.
It should be added that, ideally, content censorship is really a difficult problem not only for traditional social networks but also for decentralized social networks. Because besides positive content, there is also unwanted negative content, we will discuss more in the limitations section of SocialFi.
Content copyright
In the current era of CopyPasta (copy and paste), content copyright is something quite a luxury. People can easily copy certain content and then transfer the ownership name to their own.
Moving into the SocialFi space, each creator will have ownership of the content they create by storing it uniquely and permanently on the blockchain network through NFT technology. This content is not just text, it can be images, audio, video, ...
For example, if you post written content on deSocial, if someone else copies it and posts it on their personal page, how can you prove who the copyright belongs to?
Fully decentralized protocols can prove this through the retrieval of NFT information. The article you post will be tokenized into NFT immediately, information including content, date and time, author. When similar content is detected, the system will check who is the first author. If the content has been edited and has a similar percentage, the protocol can automatically display additional similar content below the copier's post.
With a decentralized social network, users will own their information and content as an asset instead of a commodity in traditional social networks.
Connectivity and compatibility
Connectivity and compatibility are also one of SocialFi's outstanding strengths.
Let's take this example: You have a Facebook account with 100,000 followers and over 10,000 posts. You like Twitter and want to switch to it, there are three things to do:
First, you need to create a separate set of accounts for Twitter (email, phone number, username, password, ..)
Second, you need to repost all the content from Facebook (in case you want that information to appear on Twitter).
Third, you must ask your Facebook followers to follow me on Twitter.
Things get very complicated when you want to switch platforms. With Decentralized Social, all three steps above will be completed in just a few clicks.
First, you need to know that when you join SocialFi, all your information will be stored in a single social graph owned and managed by you, including personal information, social relationships Association, posted content. This social graph layer is separate from the dApps built on top of it. And so when switching from one dApp to another, you just need to connect the wallet and press approve what you want... done!
Not stopping there, social graph is like an asset that proves the "strength" of each person. It shows social reputation, transaction efficiency, borrowing history, etc. Third parties can take advantage of this information to credit each account for their own purposes.
For example, granting a credit limit without collateral (trust), or determining the amount of money provided when this account raises funds or calls for capital. In general, SocialFi opens up many new economic models when it comes into stable operation.
Social graphs, like on-chain wallet addresses, are transparent but still private and anonymous. Just because you know the posted content and credit history of a social graph address doesn't mean you know who it belongs to.
transparent
In the introduction, you learned that social networks can influence the results of a country's presidential election. Now I want to ask one more question: Do you believe social networks can impact the development of a country?
The average time spent using social networks by people globally is 2.5 hours per day and is on the rise. In Vietnam, according to a survey by the Ministry of Labor, War Invalids and Social Affairs, young people spend 5-7 hours a day using social networks. Favorite apps are Facebook, Tiktok and Instagram.
It can be seen that the average time each young person spends on social networks is a lot. But the risk does not come from spending a lot of time on social networks, but from spending a lot of time on content on social networks.
The content navigation algorithms of Facebook, Tiktok or social networks in general are mysteries that only the project development team knows. Platforms have more than enough ability to grasp each user's psychology and direct their favorite content, which makes users addicted and spend more time on the platform.
Questions to ask: Are user recommendations checked for usefulness before being sent? Is content that contains a lot of educational value prioritized above or below entertainment and nonsense content that attracts views? On the scale between revenue and ethics, how many businesses choose ethics?
And the next question is whether or not the project will be impacted and required to redirect negative content to users of one country while redirecting positive content to its own country?
"Youth are the future of the country, impacting youth awareness is impacting the country's future!"
The transparency I want to mention here is transparency in how social networks operate. Comprehensive blockchainization of social networks also means publishing their source code, so users can understand whether there are any shady algorithms or not.
Fact: Do you know who is the leader in social network source code transparency? It is Elon Musk, X (Twitter) who "open source" part of his source code in early April this year.
Other transparency that can be mentioned is transparency in the use of user information, transparency in revenue sharing.
Earn money
From the beginning until now I have mentioned a lot about the benefits of the word "De" in Social+DeFi, so what about the word "Fi", this is probably the issue that many of you are most interested in.
In addition to the above benefits, SocialFi also helps users earn money from the useful content they create or from their personal information.
Unlike web2, in the web3 space, users are the owners of their personal information and the content they create. So, if you want to use my data for marketing purposes, please pay.
The second source of user revenue comes from the sale of copyrighted content. It can be in the form of Token-Gating (need to own a token to access) or selling each content individually. Friend.Tech is a typical project of the Token-Gating type that is shaking the market in recent months.
The third source of revenue is from fans' proactive donations through the ease of DeFi.
Or in the future, the revenue source comes from "anti-spam" of decentralized social networking platforms. This idea was given by CZ - CEO of Binance, He proposed to Elon Musk a way to fight spam by requiring users to pay for each Comment. Most likely this revenue source is also shared back to the post owner.
In addition, there will be many revenue exploitation models with SocialFi still waiting for future web3 citizens to explore.
SocialFi challenges
Ability of extension
Surely, scalability should be the first thing mentioned on SocialFi's list of problems to solve. To operate a network of hundreds of millions, even billions of users, speed and data storage capacity are huge issues.
The development of new generation high-speed Layer 1 projects such as Sui, Aptos or Layer 2 scaling solutions on Ethereum promises to bring SocialFi to reality more quickly.
Not to mention EIP-4844 (Proto-Danksharding) in the Cancun update package expected to be released later this year will allow transaction speeds on Layer 2 of Ethereum up to 100,000 TPS. That is a huge catalyst for SocialFi in the next stages.
Content moderation issues
The second challenge for SocialFi I want to mention here is content moderation. This problem is not only complicated in web2 but it becomes even more complicated when moving to web3.
SocialFi allows us freedom of speech, posting whatever we want. It sounds great, but... in addition to positive content, what about negative, sick content that no one wants to appear?
Therefore, going back and forth, you will still see that content moderation is necessary. And it seems that this responsibility is being transferred from the project owner in web2 to the hands of the DAO in web3. The content we post will be moderated by the project's decentralized autonomous organization (DAO).
From here, I think a new economic model can arise in the deSocial ecosystem. Instead of leaving the responsibility of censoring extremely complicated content to the project's DAO, a third party can appear to perform these censorship activities, temporarily called Censorship Aggregators or Censorship-as-a- Services. SocialFi projects will pay a fee for these units to censor, classify and tag content posted by users, then return the results to the project Validator to decide the level of distribution.
Security
This is an inherent problem of DeFi today. Although the properties are good under ideal conditions, currently hacking is still happening regularly, which is also a concern about the security of information. information and other assets of users.
Create network effects
In the web2 space, one of the factors that helps social networks grow strongly is the network effect. They pull together to use a certain platform that is used by relatives and friends. With the current SocialFi, there are still too many barriers for first users to join. Users need to create a wallet, deposit money to buy tokens, buy domain names, bridge tokens to the project's network, etc. If they want to attract a large number of users, SocialFi must first solve the experience problem, everything is needed. Smoothest and simplest but still retains security.
Account Abstraction is a good direction for this problem.
Sustainable economic model
DeFi can give Social the ability to accelerate and grow rapidly in a short time, on the contrary it can also bring the project back to the starting line if there is no sustainable economic model.
We have seen this in too many GameFi projects this past season. The problem for SocialFi is a sustainable economic model for both strong growth and long-term sustainability.
A typical recent case study is FriendTech. By taking advantage of the existing popularity of the new ecosystem, Base combines:
The need to join “closed groups” of influencers
Prestige from Paradigm investment fund
Airdrop promise
And the economic model has a bit of a ponzi feel
FriendTech has achieved unexpected success in the SocialFi segment. The project's peak TVL reached $52 million, bringing in $20 million worth of revenue for the project.
However hot the growth is, questions arise about FriendTech's economic model as to whether it is sustainable or not, when the amount of money that later entrants have to spend to own a key increases exponentially compared to others. enter first.
In my personal opinion, the market will always have traders, airdroppers and there will always be people who want to use the real features of the product. When the decline period comes, the traders will leave, the airdroppers will no longer exist, then only those who really want to use friend tech will be left in a way that matches the description of the project - a place to connect between influencers and people. community in a private communication space. By then we will know whether this model is sustainable or not!
Potential of SocialFi
Above, I have presented the advantages and limitations of SocialFi that need to be overcome. We have hope for a secure, transparent social communication network where everyone has full freedom of speech.
The development of scaling solutions and new generation blockchains are also important catalysts for the future boom of SocialFi. It can be seen that SocialFi not only solves the security problem that has been rising in recent years but also fits in with the development momentum of market technology.
If we look at the market's leading creator, Binance, 2/3 of Launchpad projects this year are in the SocialFi segment. If we include Hooked Protocol which took place last December, that's 3/4 of the project. A big favor from Binance for this segment.
For those of you who don't know, Launchpad is the most prestigious form of token issuance on Binance that projects wish to have.
One thing to note, each season has a leader. Binance's strong performance last season does not mean it will continue to lead the market next season. But currently Binance is still King so we have to follow closely.
In the crypto market, we have seen the support of technology and creators. So what about outside of tradition?
It is impossible not to mention Elon Musk, the boss of 𝕏, the leader of crypto movements. Since acquiring Twitter and changing its name to X he is trying to develop it into a web3 social network. The first was allowing NFTs to be placed as avatars, followed by the release of source code and recently the revenue sharing model. What he does is close to DeFi's principles.
On the other side of X's front line, Facebook is also rushing to take its own steps. Despite failures in the Diem, Novi and even Metaverse projects, Mark Zuckerberg continues to want to delve into DeFi through the recent Threads project. Pay attention to the information describing how it works and you will see that Threads' orientation is to become a decentralized social network.
Another giant in the social field I want to mention is Reddit. Not safe moves like X and Meta, Reddit is much more powerful and wild. They have taken real steps into the land of decentralization by continuously releasing NFT collections, in addition to Reddit also continuously educating users about web3.
With such great support from both inside and outside the cryptocurrency market, I believe that SocialFi will have strong developments in the near future.
If SocialFi is successful, it can attract hundreds of millions of new people to DeFi, the expansion of the cryptocurrency market will be so large that we cannot imagine. We have the right to believe in an explosive SocialFi season that will not be inferior to GameFi any day.
Classification and featured projects
The SocialFi ecosystem is growing strongly with many small branches within, but overall, we can divide it into 3 main layers:
Data & Blockchain Layer
Social Infrastructure Layer
Application Layer
Data & Blockchain Layer
As a data storage layer, projects can choose to store data directly on Blockchain or decentralized data storage services or both. But what is more common is that it is stored in both places, information related to balance and protocol status will be stored on the blockchain to ensure decentralization and security. Other information such as content posted by users will be stored in a decentralized storage service to reduce costs.
Layer 2 solutions on Ethereum will have more advantages in this battle thanks to speed and scalability. Base, Optimism, Arbitrum or zkSync are names that should be of interest.
IPFS, Arweave and Filecoin are all long-standing projects in the decentralized data storage space. The new rookie is Greenfield, developed by Binance, launched in February this year to serve Web3.
Social Infrastructure Layer
This can be considered the core layer of the SocialFi ecosystem, it includes all infrastructure components serving SocialFi dApps.
Most importantly, the Social Graph array is the protocols for building and managing the social graph of each user.
Lens Protocol is currently the name receiving the most attention. In addition, we have Cyber Connect, Hooked, DeSo, all of which are active projects in this field.
The second small area in this layer is user identification protocols - Identify. Some outstanding projects include: ENS, SpaceID, Unstoppable Domain. The POAP (Proof Of Attendance Protocol) projects are also a group that increases the ability to identify and evaluate users with proofs of participation.
In addition, we also have tools to help convert web2 to web3, typically the Mask Network project, which gained a lot of fame due to its rapid development at the end of last year.
Application Layer
This is the most interesting layer of SocialFi, not only because of its diversity but also the driving force that attracts users to participate in the ecosystem.
The differentiation of this layer is quite diverse, below I am dividing it according to the purpose of use of the protocol. You can also classify by other criteria if you want.
Social Network: Social networks in the form of message boards created by users, similar to Facebook and Twitter. Outstanding projects: Lenster, Farcaster, Phaver, FriendTech.
Messaging: dApps help users message each other. Featured project: iMe.
Publishing: Through these applications, users can create personal blogs and post content or courses. Outstanding projects: Mirror, Open Campus.
Video: Video social network, similar to Youtube or Tiktok. Outstanding projects: CosTV, Lenstube
Music: Projects that help users upload and share music. Notable projects: Audius, Soundxyz
Talent Network: Employment social network, connecting talents and employers. Notable projects: Braintrust, Human Protocol
Gaming: If you remember ZingMe, this is the same format but on web3. Featured project: Hooked, Valhalla.
Social Token: Through these platforms users can issue their own personal tokens. Notable projects: Rally, BitClout, TryRoll.
Sub categories:
Web2.5 - Social: Social networks are transforming from web2 to web3, temporarily called web2.5: 𝕏 (Twitter), Threads (Meta), Reddit, Binance Square.
Conclude
Twitter was born in 2006, it took 5 years to reach 100 million users, it's been 17 years now. Facebook was founded in 2004, it took 8 years to reach 1 billion users and has been growing for 19 years now.
SocialFi is a new concept that has only been mentioned a lot in the past 2 years and no project has even come into official operation yet. So according to you, are we at the night or dawn of SocialFi? And how long will it take SocialFi to get its first 100 million users!
Hopefully through this article you have grasped all the advantages, disadvantages, potentials and difficulties that SocialFi must solve. And together we will follow the development to answer the questions above!
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