Technological innovations have revolutionized the concept of living, connecting, interacting, and pretty much everything. When shedding light on how the internet has been a major transition in the modern age, social media has played a vital role in interweaving all that there is together.
Even social media has evolved into something unimaginable, which we now call SocialFi. Yes, you heard it right! SocialFi has become a powerful ecosystem for social media platforms that are expanding their breakthrough capabilities with crypto, NFTs, metaverse, and now, DeFi.
Instagram, Twitter, Reddit, Facebook/Meta, and even YouTube have embraced the decentralized culture to such an extent that they have begun adopting and exploring the SocialFi space. If you are wondering how SocialFi has come into the picture and what exactly we are talking about, then read on!
What is SocialFi?
SocialFi is an umbrella term given to the amalgamation of the fundamentals of social media and decentralized Finance (DeFi). SocialFi platforms leverage blockchain technology to develop a one-of-a-kind Web3 experience that offers users to create, own, and manage content generated on social media.
What sets it apart from other social media platforms is its ability to not only allow the content to be monetized but enables the user to make money through engagement and following as well.
Unlike social media platforms, it has better control over shared data while promoting freedom of speech.
All of this may seem unreal, but in reality, SocialFi projects are created to monetize social media interactions through cryptocurrencies and NFTs. As a result, both creators and consumers manage their identities online and claim ownership of their digital assets.
Simply put, SocialFi is the added financial layer to social media platforms such that it performs in a decentralized manner. Incentivizing content creation and improving network security are its two pillars that empower users to have control over revenue, data and moderation.
In the SocialFi ecosystem, no single entity has authority over how content would be regulated, instead, the community tied to the platform takes decisions through DAO.
What is SocialFi Ecosystem?
The SocialFi ecosystem is a fusion of social networks and Web3 ethos. This means it is focused on solving the issues that conventional Web2 social media platforms face. Its infrastructure is designed in such a way that it covers all the aspects that have been lacking in current social media platforms. Some of them worth noting are:
Role of DAO in SocialFi Platforms
Decentralized Autonomous Organizations (DAOs) form the required framework of SocialFi projects, platforms and apps. As no single entity controls these platforms, creators can establish DAOs to represent the decentralized governance scheme where key decisions are taken after a voting process. This model prevents centralized censorship decisions and hence, promotes better user involvement.
Whoever uses the platform can vote to shape the project for future developments. Improving the SocialFi platforms under DAO works in favor of everyone who is part of the ecosystem. In this way, each participant gets to play their role in decision-making.
DAO model is a key design of Web3 platforms such as SocialFi, at the same time it allows managing incentives fairly across all stakeholders.
Monetization and Incentivization via Social Tokens
Attracting a new stream of revenue is never a bad idea and that too when you get to earn some incentives while using social media. SocialFi truly has diversified the social media experience by introducing a concept of social tokens and in-app utility tokens.
The concept is similar to GameFi and is combined with DeFi, which already have been using utility tokens to drive in-economics. In the case of SocialFi, social tokens are an added feature that is responsible for controlling the economy of the platform.
These tokens are not just limited to the application level but are exposed to the user level as well. Simply put, the tokens are not controlled by the platform itself but creators can decide how they want their tokens to be utilized by their fans and followers.
Social tokens allow creators to manage their own economies and content. Note that, all social tokens are not worth the same. Every user with significant brand equity has their own token, but not every user has the level of authenticity that allows their token to be in demand among the community.
The social clout of the user decides the value of the token. For example, some celebrity’s tokens will be on demand more than a basic user’s token with no fan base. This way, celebrities’ tokens will be higher than that of ordinary users.
Social tokens are designed on the following aspects:
- Only those who hold a creator’s social token can engage and interact with their content. This means that if you want to engage with your favorite celebrity post then you need to hold his/her social token in your wallet.
- If you happen to hold the highest number of some influencer’s social token, then your message can be listed at the top of the responses. Hence, fans and followers can get the attention of their favorite celebrities or creators.
- SocialFi platforms also provide creators with better distribution capabilities to broadcast their work. An artist can choose to share the proceeds of the sale with their social token holders. As such, it creates an incentive mechanism for the followers of the artist to promote their NFT collection. This approach can potentially increase sales of the NFT artworks.
- The impressive utility of social tokens is that creators and influencers can set thresholds that will allow fans with more than a certain number of their social tokens to message them directly.
- Creators, artists, influencers, or any public figure with a huge following can even create a subscription model. With this, their fans and followers can buy subscriptions with social tokens and get premium access to their creative content.
- If a user wants to interact with someone’s content either through a like, comment, or share, it will cost them money.
This monetizing system will encourage genuine participation and will also reduce spamming as even messaging will cost some social tokens. Above all, it will help creators and influencers monetize their brands in a more efficient way.
How does SocialFi work?
SocialFi works as a medium to monetize content such that one has complete control over their online identity, ownership of users’ personal assets, and privacy. Unlike social media, it offers a decentralized, open, and user-controlled ecosystem.
On social media, you can only monetize content, but the SocialFi platform gives a more immersive experience in which you can have your own social token which can be used and regulated as per your discretion. For every interaction you have on your post, you get to earn income.
Your followers have to buy your token to consume the content you create. The more you get recognized on the platform, the more people will want to collect your token for having access to your content.
You can even implement a subscription model if you build a significant user base to commercialize on a much larger scale. It’s up to the creator to incentivize their fans and followers by rewarding them for participation in any social activity they host within the platform.
Advantages of SocialFi
SocialFi platforms are all about empowering users and providing them with revenue opportunities for every interaction and engagement. Users can also earn income through activities such as NFTs minting, communicating, advertising, or hosting a livestream.
Unlike existing social media apps and platforms, revenue from content creation and general advertiser revenue can be fairly distributed without a central figure taking a major portion, making all the profit. Other than that, SocialFi has many perks over the social media platforms which we have discussed below.
Managing Identity and Digital Ownership
Seeing the buzz, now social media giants have also started verifying the NFT profile authenticity. Amid the recent developments in the decentralized space, SocialFi will level-up the already evolving social media.
In the last few months, we have witnessed the explosive growth of DeFi and NFTs in almost all sectors, including gaming, fashion, real estate, fast-food chains, and what-not. Multi-billion-dollar social media companies have also become obsessed with PFP NFT collections like Bored Ape Yacht Club, Moonbirds, and CryptoPunk.
Celebrities using NFTs as their profile pictures on various social media platforms further hyped the “blue-chip” NFT collections. Along with famous folks, crypto enthusiasts also flaunted their NFT profile pictures on Twitter and Meta. There is an emotional connection and a sense of higher status attached with NFT holders who consider these PFP NFTs as their identity.
The added perk as a SocialFi platform user is that you can use your NFT as your profile picture and confirm the ownership of the NFT by just connecting your wallet. Apart from using it as an identity, PFP NFTs will also provide exclusive access to certain communities within the platform.
These communities could offer experiences such as events, campaigns, opinions, open discussions, and even potential investment opportunities to their NFT holders. Though it is already possible in Discord groups, it could also be a feature on SocialFi.
Freedom of Speech and Censorship
SocialFi offers a great sense of freedom of speech without users’ messages being throttled by censorship. Content posted on these platforms is free from overreaching moderation or targeted censorship.
It promises a fair share of revenue and the freedom to post without overreach, making platforms a great opportunity to create a passive income through social activity.
Freedom of speech and censorship is something social media has been struggling with for so long.
While regulating content is tricky, we do not want centralized censorship. At the same time, we also don’t want harmful content being distributed across the communities without any control. In such a case, SocialFi resorts to striking a balance by working on decentralized curation via labeling of on-chain data.
All publicly viewable content or posts are stored on-chain. Hence, the on-chain data is available for rules engines to filter and quickly label posts based on the topic and the nature of words used.
The nodes on the chain select the right post and block some labels while engaging with others. If a node chooses to engage or endorse a harmful post then it would be liable to legal prosecution.
In this way, central authority or a small team within a central organization are not responsible to decide what must be allowed within the network. This is the major advantage of SocialFi over Web2 platforms. Thus, the control, management and accountability are tied to the individual.
What are SocialFi Projects?
SocialFi projects are the platforms and apps that combine social networking with blockchain finance such that users get a chance to earn via SocialFi activities.
These projects offer an opportunity to earn money by creating content, minting NFTs, interacting with other users, attending events, and engaging in gaming experiences within the platform.
Though there are several SocialFi projects, here we are mentioning the names of the top 5 projects that can help you earn as an artist or creator. Mask Network, Coinverse, Peepeth, Nafter, and Mirror are among some emerging SocialFi projects that you must check out.
As was already discussed, social tokens are what create a positive reputation, brand, and a supportive community. Social tokens give value to the community within the platform while helping in content capitalization, casting and distribution.
Different projects use different versions of a social token including personal tokens and community tokens. However, the function remains the same, that is to use tokenized rights to boost the rewards of creators, cultural producers and associated players.
The Future of SocialFi
Social media platforms such as Facebook/Meta and Twitter have already leveraged blockchain mechanics such as verified NFT profile pictures, creating their own crypto wallets, and NFT marketplaces.
However, SocialFi will go a step further to become the new way to monetize activities like sharing pictures, building a follower base, or even receiving messages, likes, and comments.
Further, it will protect and secure users’ personal data, distribute advertising money equitably, and deliver a more valuable user experience. Despite social media giants already incorporating blockchain functionality, adding the financial component of SociaFi will require entirely new platforms and applications to empower users.
SocialFi has become the new venture for tech giants to invest in and it would be interesting to see how it brings distribution mode, asset protection, monetization via token model, and community management, all power-packed on one platform!
