SocialFi and How it is Reshaping the Social Media Landscape

7 min read4 days ago

What is SocialFi?

SocialFi combines social media and finance. It lets users interact on social media while earning money from those interactions. Imagine Patreon (a monetization platform that provides business tools for content creators to run a subscription service) but without a middleman. Content creators can directly engage with paying users.

Indirectly, SocialFi is Web3’s answer to existing Web2 platforms like Facebook, Reddit, and TikTok which currently dominate the social media landscape. Unlike traditional social media, SocialFi removes expensive middlemen (the trillion-dollar conglomerates that own these platforms), allowing for better earning opportunities.

SocialFi builds on the ideas of DeFi (Decentralised Finance) and focuses on privacy, security, and data ownership. This way, creators can keep most of their money, making it a fairer system for everyone.

Key Features of SocialFi

SocialFi overcomes the limitations of Web 2 with these essential features:

Data Ownership: Content creators control their data and earn through cryptocurrencies.
Censorship Resistance: Decentralisation ensures everyone can participate, unlike web2 platforms that can ban and censor people to make sure they adhere to certain behaviours and norms.
Digital Identity and Tracking: Users’ identities and ownership are reinforced by NFTs.
Monetisation: SocialFi uses social tokens linked to interactions, content creation, and influence, allowing users to contribute and earn in a decentralised ecosystem.

Who Benefits from SocialFi?

SocialFi platforms are designed for a variety of users with different interests and needs:

Content Creators and Influencers: If you create content (blogging, vlogging, art, influencing), SocialFi offers new ways to monetize your work through social tokens and crypto.
Tech-Savvy Individuals: Those interested in blockchain and cryptocurrency will find SocialFi appealing for engaging with the latest digital trends.
Privacy-Conscious Users: If you prioritize privacy and control over your data, SocialFi provides enhanced security and data ownership compared to traditional social media.
Fans and Community Members: Fans can engage more interactively and rewardingly with creators and brands through tokenized interactions and governance.

In general, SocialFi is designed to transform social interactions into financial benefits using a secure, decentralised infrastructure. Whether you’re a creator or a user seeking more control and rewards, SocialFi offers features for a tech-savvy, privacy-focused audience.

SocialFi vs DeSoc

Though SocialFi and Decentralised Social Networks (DeSoc) share similarities, they differ fundamentally in their core focus. SocialFi prioritizes monetising social interactions, resembling the contrast between Patreon and Instagram (in the web2 context).

While both serve as platforms for content and community engagement, their purposes vary: SocialFi revolves around financial transactions, while DeSoc leans toward fostering social connections.

Think of SocialFi as the Web3 version of a social networking platform while DeSoc aims to create a tamper-proof record of users’ identity and social relationships in the Web3 world.

Why SocialFi Matters

Social media has transformed how we connect, share, and monetize, but Web2 platforms have limitations. These platforms centralise control, undermine personal brand value, and raise concerns about censorship, privacy, and data use.

SocialFi seeks to address these issues. It revolutionises online social interactions by incorporating social tokens reflecting individual brand value. In this model, users are not just passive participants in a platform’s revenue scheme; they can actively monetize their influence, content, and engagement. This tokenization concept shifts power away from centralised entities and gives it to individual users.

Moreover, SocialFi could be a solution to the tension between freedom of speech and censorship. By adopting decentralised curation, content moderation becomes a shared responsibility, reducing the biases that can arise from centralised decision-making.

Challenges for SocialFi

Despite the promise of SocialFi, there are significant hurdles to widespread adoption:

Scalable Infrastructure: Major social media platforms like Facebook and X have invested millions in infrastructure to handle vast amounts of data. Facebook alone processes millions of comments, statuses, and photo uploads, generating around 4 petabytes of data per day. The question is, can Web3 social media platforms manage this scale without centralised servers? With warp sync and sharding, this could be solved, but it hasn’t been seen in any of the SocialFi platforms (but this could change soon).
Sustainable Economic Model: SocialFi platforms attract users with generous token rewards, but this model might not be sustainable over time as these incentives have so far proven to be short-term growth hacks. All the aspects that we discussed in the incentives of SocialFi are still being experimented on a small scale. These models must be stress-tested through several market cycles and black swan events before they can go mainstream.

The Surge of Interest in the SocialFi Sector in 2024

2024 marks a significant year for SocialFi, driven by several trends and technological advancements reshaping how we interact online.

This year, we’re seeing a greater integration of blockchain technology into social platforms, enhancing user control and content monetization. The growth of platforms like Friend.tech exemplifies this trend, where users gain from robust community features and financial rewards for their engagement and content creation. According to CoinGecko, SocialFi coins have a combined market cap of over $4.89 billion as of 13 June 2024.

It is also the top-performing cryptocurrency segment YTD based on capital appreciation:

Moreover, advancements in blockchain infrastructure, such as improved scalability solutions and decentralised governance models, make these platforms more accessible and efficient. Innovations on new SocialFi platforms like Farcaster and Lens Protocol are revolutionising user interaction by enabling content to be shared and monetized across various platforms without losing ownership rights.

This level of interoperability and user control attracts a broader audience to SocialFi platforms, eager to benefit from a more equitable and transparent social media landscape.

SocialFi Projects to Watch

Here are some prominent SocialFi projects worth noting.

Friend.tech (with its recently launched V2)

Friend.tech (‘FT’) is an innovative SocialFi platform built on the Base blockchain, designed to redefine social media interactions by integrating financial stakes into social interactions.

In its first version release, FT gained a lot of traction by creating a dynamic where both influencers and users could potentially profit through a system of buying and selling “shares” in influencers’ social influence. However, the model had its drawbacks, primarily because of the high fees involved (10% fee on both buying and selling shares).

Launched on March 3, 2024, FT V2 introduced several new features and changes. Notably, users can now claim their $FRIEND tokens, which marks a significant update. However, the launch has been criticised for its lack of clear information and guidance, particularly regarding new elements like the “clubs.” The current metrics are falling short of those expectations as FT struggles to differentiate itself and retain users amidst competition from other decentralised competitors like Farcaster and Lens Protocol.

Farcaster

We can’t talk about web3 social without mentioning Farcaster. Launched in 2020, Farcaster is a decentralised social media protocol that lets developers build their own social media applications on top of it.

One of the most exciting recent developments in the Farcaster ecosystem is the introduction of “Frames” — interactive mini-applications embedded directly into posts. Frames enable developers to create rich, interactive experiences within the Farcaster feed, from simple polls and quizzes to complex games and marketplaces. We wrote an in-depth article on Frames recently. Read it here.

SubQuery currently has a bounty for builders to create a frame that queries the SubQuery Network — with 3 prizes up for grabs and first place will win 500 USDC and 15,000 SQT. Check out our Farcaster bounty.

Lens Protocol

Lens Protocol, launched on the Polygon blockchain in February 2022 by the team behind Aave, offers a decentralised social media platform enabling users to maintain ownership and control of their content through NFTs. Each user’s data, including posts, followers, and social interactions, is associated with their unique NFT profile.

Throughout 2023, activity in the Lens ecosystem slowed until a resurgence of interest in Web3 social media and the emergence of Farcaster in early 2024. Lens currently has over 22,000 daily active users, while its closest competitor, Farcaster, sees between 25,000 and 30,000 daily active users (Source: Dune).

Learn how to set up a SubQuery indexer for Lens Protocol in this guide.

Galxe

Galxe redefines how credentials are issued and verified in the Web3 world, creating a more user-focused social media ecosystem. Galxe leverages its Web3 credentials technology by developing SocialFi solutions that connect Web3 identity and content to tokenized earnings. Additionally, Galxe offers quests, tasks, and hiring within a tokenized ecosystem.

If you’re planning on running a Galxe campaign for your project, you can use SubQuery as a data source to validate your audience’s on-chain actions (for example, if they have staked on your network they earn points). GraphQL-sourced credentials, including those from SubQuery, allow Galxe to gather data from a SubQuery Project. Find out more here.

What’s Next

SocialFi stands at a promising crossroads of social media and blockchain by mixing decentralised finance with social networking. In essence, it is about rebuilding the very foundation of social media around the principles of user ownership, privacy, and freedom.

Despite challenges with infrastructure and sustainable business models, SocialFi platforms show great promise. As the world increasingly shifts towards creator-driven models, SocialFi’s goal of creating a fair and transparent online space where users profit from their social interactions positions it to lead this revolution.

About SubQuery

SubQuery Network is innovating web3 infrastructure with tools that empower builders to decentralise the future. Our fast, flexible, and open data indexer supercharges dApps on over 200 networks, enabling a user-focused web3 world. Soon, our Data Node will provide breakthroughs in the RPC industry, and deliver decentralisation without compromise. We pioneer the web3 revolution for visionaries and forward-thinkers. We’re not just a company — we’re a movement driving an inclusive and decentralised web3 era. Let’s shape the future of web3, together.