The growing popularity of decentralized technologies and Web3 solutions clearly illustrates that centralization is not well-liked by people. While the trend towards decentralization is most evident in finance, other fields are not far behind. Recently, Web3 solutions gained momentum in the social media field. So, we decided to take a closer look at the current trends in this field to find out how the social media landscape will transform in the near future.
What Does Socialfi Have to Offer?
SocialFi is a concept of social media where users are in full control: the platform is decentralized, the users fully own their data and receive the lion’s share of revenue generated by the platform (as opposed to the current situation, where most money goes to giant tech corporations).
SocialFi offers plenty of advantages over the traditional social media:
- Financial incentives for social interactions. SocialFi offers economic incentives for social interactions – users don’t have to depend on advertisers to get paid. This is, obviously, the origin of the very term “SocialFi”.
- Privacy and data security. The lack of a centralized database removes the risk of personal data leaks. Moreover, SocialFi grants users full control over which data they are willing to share.
- Data ownership. In SocialFi, platforms have to obtain user permission to use their data, not the other way around.
- Absence of centralized authority. Asset ownership on a SocialFi platform can’t be changed on the whim of the platform’s owners due to the utilization of blockchain. The same immutability also applies to applications developed and deployed for the platform by third parties.
Current SocialFi Trends
At the moment, we can observe three major trends that define the entire SocialFi segment development.
The Growing Interest of Major Crypto Players
A number of crypto and DeFi platforms started to develop their own SocialFi products and protocols:
- AAVE launched the Lens Protocol, which is tailor-made for creating decentralized social media apps.
- Vitalik Buterin has publicized his account on Nostr, a Web3 social media network – such attention from a major player in the crypto world is worth a lot.
- CyberConnect platform managed to attract $15 million.
- Cointelegraph has created an accelerator program for social media Web3 projects.
- Tribes, a Web3-messenger, has raised $3.3 million in a pre-financing round.
Integration of WEB3 Elements Into Traditional Social Media Platforms
Some major Web2 social media platforms started to offer Web3 capabilities to their users, mainly in the form of NFT tokens.
- Reddit enabled NFT avatars as a way to support content creators.
- X (former Twitter) enabled NFT avatars for X Blue subscribers.
- Telegram sells unique usernames as tokens on the TON blockchain and announced plans for a proprietary decentralized exchange.
- VK (a major Russian social media platform) added NFT avatars, showcased tokens, and announced the NFT marketplace launch.
Dedicated Socialfi Solutions Continue to Struggle
While “Web3 add-ons” to Web2 social media gain more popularity, platforms designed from the ground up as SocialFi apps struggle to maintain user interest. The most obvious recent example is Friend.Tech that has shown explosive growth in the first weeks after the release, but a few months later, the user activity on the platform mostly died out.
Challenges the Socialfi Industry Faces
Force of Habit
People tend to stick with what they are used to – platforms like Twitter (X) or Facebook – and are reluctant to switch. Moreover, some Web3 elements may be off-putting. For example, anonymity can reduce users’ sense of social engagement.
There Are No Mature Products Yet
SocialFi is still in its infancy and suffers from a notable lack of mature products and protocols. This immaturity is apparent in all aspects, from UI/UX design (it is hard to find a user-friendly Web3 social media platform) to value extraction and incentive mechanisms – at the moment, SocialFi platforms can’t enable financially sustainable content creation.
Limited Number of Users
Due to the aforementioned issues, current SocialFi platforms struggle to attract and maintain their user numbers. Typically, there are only a few thousand daily active users per platform. This limits the resources SocialFi platforms can dedicate to further development and improvement.
As a result, platforms introducing SocialFi elements as “add-ons,” be they “old-school” social media platforms or large players in the DeFi market, have a significant competitive advantage at the moment.
The Prospects of Socialfi
The prospects of SocialFi look promising as users gradually appreciate the Web3 world. SocialFi apps across the digital world can enhance social media networks and help businesses and communities work together.
While the SocialFi segment as a whole is expected to grow, it is yet impossible to tell which type of dApps will dominate the SocialFi landscape. Both DeFi projects and “old-school” social media clearly set their sights on this segment, and we haven’t yet seen a truly successful project designed from the ground up as a SocialFi app,
However, it is already obvious that the entire social media landscape will gradually change due to the advantages provided by Web3 elements and SocialFi concepts. So, we can expect the line between Web3 and “traditional” social media platforms to get even more blurred in the coming years.