What is Social-Fi?
Social-Fi, an emerging concept in the crypto-space, is a Web3 fusion of Social Media and decentralized finance (De-Fi). Uniting these worlds, Social-Fi empowers users to generate, oversee, and possess their user-generated content on various platforms.
Through Social-Fi, individuals or groups can use Social Tokens for transactions and gain special advantages within decentralized social networks. Earnings can be accrued via Decentralized Social Media activities such as likes, shares, and video streaming, as well as through various reward mechanisms like daily rewards, account ratings, and monthly shares. Additionally, NFT accounts and markets are part of the ecosystem.
Friend.tech serves as an example of an application within this innovative concept. It operates as a decentralized social network, enabling users to buy and sell “keys” (formerly known as “shares”) associated with Twitter (now X) accounts. These keys grant access to private in-app chatrooms and exclusive content from the corresponding X user, embodying the platform’s identity as “the marketplace for your friends.”
What Are The Key Elements of Social-Fi?
Social-Fi aims to change social media by following Web3 principles, focusing on fixing Web2 social media platform issues. Web3 replaces centralized server-client structures with distributed ledgers, like blockchain, spreading data across a decentralized network, removing the need for central intermediaries.
Digital Ownership and Verification
Verifying digital identity can pose challenges, as existing social media platforms often contend with fake accounts, making it tough for users to confirm the legitimacy of profiles. Picture for Proof (PFP) NFTs have introduced an innovative digital identity solution, establishing strong emotional bonds with their owners. These NFTs can function as profile pictures and proof of ownership on Social-Fi platforms, providing a resolution to this issue by connecting them through a wallet. Likewise, they can serve as evidence of membership, granting exclusive entry to various communities.
Social-Fi introduces social tokens as a novel economic tier, extending beyond the application level to allow users to create their own tokens. This empowers creators to oversee their individual economies using these social tokens.
Now, any user with substantial brand recognition can establish their unique token. For example, a celebrity can launch their token, creating a micro-economy centered around it. The token’s value will directly correlate with the celebrity’s social influence, resulting in some users’ tokens having higher value compared to regular users who are just establishing their social media profiles.
Censorship is a subjective challenge that many Web2 social media platforms have grappled with. Social-Fi platforms address this issue through decentralized curation by labeling on-chain data. All publicly accessible posts on a Social-Fi platform are recorded on the blockchain, making this data available for rules engines to swiftly categorize posts based on their subject and content.
The responsibility lies with the nodes on the blockchain. Each individual node has the autonomy to block certain labels while engaging with others. If a node decides to support harmful content, it may face legal consequences. This decentralization ensures that the decision of what is permissible within the network is not controlled by a central authority or a small team within an organization but rests with individual users, along with the corresponding responsibility.
Social-Fi has the potential to change everyday finance and investing. For instance, on SocialFi platforms, users can access financial services like loans, investments, and insurance, which were hard to get through traditional banks. This is possible by using their social connections and reputations.
SocialFi can also impact finance through social investment platforms that combine social media with DeFi protocols, similar to traditional investing. Some platforms already do this, allowing users to create and trade synthetic assets that mimic real-world assets like stocks. Users can follow others to see their trading strategies or even copy them in real-time using DeFi.
All of this operates on a blockchain, which serves as an open and transparent platform where all transactions are publicly recorded. This heightened transparency is a fundamental feature of blockchain technology. Every action and transaction within the SocialFi ecosystem is visible to anyone who wishes to view it. This transparency not only enhances trust but also provides users with a clear view of the entire network’s operations, fostering a sense of accountability and integrity in the decentralized world of SocialFi.
SocialFi employs decentralized governance through Decentralized Autonomous Organizations (DAOs), enabling user participation in vital decisions. Users gain voting power with governance tokens or other means in DAOs, allowing them to influence crucial platform choices via on-chain governance. Additionally, these networks manage on-chain treasuries via DAOs for ecosystem development and promotion. This empowers SocialFi users to collectively shape the platform’s direction, fostering a more community-driven approach to decision-making.
What Are The Challenges
Firstly, scalability is a crucial challenge to address. To ensure that Social-Fi and Web3 can cater to a broad user base, it will need to be capable of efficiently managing vast amounts of data and transactions, and in a sustainable way. Security will be another concern as Web3 must provide robust data protection measures that surpass the current security standards of its Web2 counterparts.
Additionally, Web3 socialization will need to prioritize interoperability to ensure compatibility across various platforms and operating systems and encompassing diverse devices. Finally, the usability of SocialFi platforms will be very important as they must be intuitive and user-friendly, catering to both tech-savvy individuals and the average user.
Friend.tech, launched in August 2023 and quickly gained attention as a social crypto success. In its first two weeks, it attracted 100,000 users and made $25 million. The platform offers “keys” tied to Twitter (now X) accounts, granting access to private chatrooms and exclusive content. It’s known as “the marketplace for your friends.” Each user has a chat group like on Telegram, but you need to buy keys for access. In the broader context, Friend.tech is part of the social token-driven platform trend, combining traditional cryptocurrencies with patronage systems for monetizing online communities.
Another compelling use case is Stars Arena, a social finance platform operating on the Avalanche blockchain. The app was swiftly developed within just one week, a timeline that may have contributed to a potentially hasty ‘go-to-market’ approach and security vulnerability. Nevertheless, the team promptly resolved the breach, securing funding on the very same day to not only address any gaps but also confront the security challenge that arose on October 6 – Remarkably managing to recover 90% of the impacted funds.
Stars Arena enables users to acquire stakes in Twitter (X) personalities, similar to friend.tech. You can register using your Twitter (X) account and engage with the personalities featured on the platform. It offers a unique opportunity for users to trade these shares as financial assets. Unlike some platforms, it doesn’t require deposits or referral codes for access.