SocialFi has its own moment.
Dune Analytics’ dashboard shows that since Friend.tech launched in August this year, it has received more than $420m in funding. The Web3 social mobile apps Phaver & RepubliK announced their own fund raising last week.
The hype surrounding crypto-native media is not new. However, a crop of Web3 apps has emerged to take on the established social media giants. As the Web2 titans grapple with issues such as content moderation, fair payments for creators, and other challenges that they face today founders and investor say there is an opportunity.
SocialFi: What is it?
SocialFi is a blockchain-based platform that monetizes social interaction.
Platforms like SocialFi use crypto-based infrastructure to allow content creators and users to get paid for their scrolling. SocialFi is regarded as a better business model than the current social media giants.
“The normal revenue model is the users are the product,” Gary Henderson said that he created a native Solana app named SocialFi. “Here, we’re saying the users are our [clients] and we’re selling to our users and they’re supporting their favorite creators and we’re pulling a chunk of that condition out of the middle.”
Blockworks Research’s dashboard shows that Friend.tech is the SocialFi application most in demand over the last few months. This app has spawned several spin-offs. In fact, it accounts 46% of activity within Coinbase layer-2 BASE.
What is the socialFi app archetype?
Amongst the Blockworks sources that Blockworks contacted, there were a number of general opinions about Friend.tech’s sustainability.
The first thing to note is that the app’s financial aspects are very strong. Users can buy and sell tokenized currencies on Friend.tech. “keys” The creators of X accounts can be contacted through group chats. Prices are subject to bonding – which makes keys more expensive with each purchase. This setup allows users to essentially place bets on creators — early buyers can sell for big mark-ups if their keys ascend the bonding curve.
Users must connect a crypto wallet to access Friend.tech, and much of the culture coming out of the app connects to making a profit — such as (3,3), a game theory reference where users reciprocally buy keys.
“Does the average person want to be paying money to have access to social media? I don’t think so,” Sam Lehman said. He is an associate at Symbolic.
Niklaspolk, a Nansen research analyst and senior researcher, believes that Friend.tech’s bonding function is good to encourage adoption because users are trying to get keys in before prices soar. Polk, a senior research analyst at Nansen, said Friend.tech’s bonding curve is good for driving adoption as users try to snag keys before their prices skyrocket.
And the model of Friend.tech has already run its course. BitClout’s tokenized profiles with bonding-curve pricing made waves in the year 2021, but it was doomed by controversy and an unworkable economy. Blockworks had previously stated that BitClout’s creators’ theoretical app gains would be difficult to convert into fiat.
The creative middle class
The legacy social media brands compete to encourage content creation through financial rewards for creators. X launched its ad revenue-sharing program during the summer. TikTok, Snapchat and other creators are eligible for payouts.
SocialFi developers think that their apps will eventually be more attractive to creators.
Content moderators can sometimes demonetize social media content creators for a variety of reasons. SocialFi’s founders have promised greater transparency in monetization, along with minimal censorship.
“You can create a platform that does allow folks to capture some of the value that they are bringing to the platform but in a way where you can’t have the floor pulled out from under you,” Lehman said.
Multiple sources have expressed their optimism regarding a middle-class creative on SocialFi. Small creators may be able to monetize online personas better than the larger creators.
“It’s not financially beneficial for Taylor Swift or someone like that to limit themselves at this level,” Henderson, “The local musician that’s maybe doing some really cool stuff could turn SocialFi into a $10, 20, 30,000 a month income stream with only maybe 500 or 1000 true fans.”
What are the benefits for regular users of this product?
SocialFi is experimenting by offering financial rewards to users who simply use the app. RepubliK lets its users gain XP by liking and participating in challenges within the app. Airdrops of the platform’s native token will be given to users according to their XP.
Lehman explained that SocialFi platform is looking to reward its users for their contribution in improving platforms.
“It’s kind of like the penny slots in the casino, you know? I could be playing the baccarat table for $1000 or I could be playing for pennies. I still have a stake in it,” Adi Sideman said that Revel is a social platform for collecting collectibles.
SocialFi has also experimented with the social version of stake. Phaver users, for example, can stake tokens in content that they believe will be popular. The user receives token rewards if the content goes viral.
Why is SocialFi on-chain required?
While SocialFi’s cryptography is unique, it could be easily copied by wealthy social media titans to run on their own servers.
Tekin Salimi is founder of dao5, a crypto-investment fund. He said that censorship is the most important selling point in on-chain social networks, especially as the interest for financial speculation has been slowed by the bear markets. Salimi claimed that legacy social media companies’ controversial content moderating policies have alienated some of their user base.
Salimi is of the opinion that SocialFi can be an effective solution to platforms’ struggle for a fair middle ground in content moderation.
“Crypto social is one of those things where it’s not just like you have left option and right option,” Salimi compared SocialFi platforms with a “pendulum” This can be adjusted based on the preferences of users.
Multiple sources have cited demonetization and the sometimes arbitrariness of moderation in social media as selling points. Lehman recalled how Animoca Games, a game that ranked high in the App Store rankings but was then banned by Apple for its arbitrary nature of content moderation and demonetization.
The blockchain may not attract users for its own sake. Daniel He is the co-founder of SocialFi App RepubliK. His team asked 1,000 creators about their interest in the likes and comments being stored on blockchain.
“They actually completely didn’t give a shit,” He added. Creators said they were more concerned about the use of blockchain for verifying users’ identities and to prove whether fans have enough money in their wallets to pay premium interactions.
What is the social graph? Why should I own it?
A social graph is the network of social interactions that compose someone’s social media presence — the posts, comments, likes and follows that form a complex web of connections between online profiles. Social graphs are currently owned by social media companies — and their sum total is quite valuable.
“Elon Musk [has] one of the biggest text databases in the world, and there’s a [monetary] reason why he closed his API,” Eric Na is a software developer for INLEO.
Aave’s Lens protocol develops infrastructure for decentralizing social graph ownership. The social graph of the user is moved onto-chain by creating an NFT on Lens. This protocol is branded. “your last social handle.”
“Owning your digital profile and social graph[…]means you have full control of your digital identity, including the ability to set privacy parameters, distribute your content how you choose, and belong to a variety of social networks,” Christina Beltramini is the head of Aave’s growth, according to a Blockworks statement.
Lens raised $15 million in the summer.
If a social graph is on-chain, a user would not lose their entire social media existence if they were booted out of one platform. Interoperable social networks would allow users to switch platforms easily, if there were any disagreements with the monetization of content or its moderation.
How big will SocialFi become?
SocialFi is still playing catch up despite the buzz surrounding Friend.tech, and other newcomers. Dune Analytics’ dashboard, from Impossible Finance revealed that SocialFi, which includes Friend.tech and Lens, had around 300,000. Compare this to X’s recent disappointing report on 225,000,000 daily active users.
“Friend.tech is extremely popular for a crypto app,” Polk said “It doesn’t really come close to the super popular Web2 apps.”
Blockworks sources generally agreed that SocialFi needed to be matured before it was ready for adoption. Friend.tech’s interface is buggy. Stars Arena, which was a momentarily dominant game, has been exploited by hackers for $3,000,000. It is possible that platforms built upon financial speculation will not last.
Salimi stated that his company, along with other investors, is mostly in “wait and see mode” SocialFi. Lehman says the latest crop of SocialFi financialized apps might not prove to be successful. “sticky” Users can download the app.
It’s early, but as popular crypto-mantra goes. SocialFi’s orbit contains many ideas that have not been tested at large scale. Social media legacy has a leg up and more money. SocialFi is a new approach to a market that has been dominated by a few major players for over a decade.
“They’re fun, they’re kind of unique experiences…it feels like you’re part of an inner circle and you’re early to something that’s very exciting,” Lehman said.
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
