We live in a constantly evolving world with new discoveries and inventions. Several sectors have developed over the years, so witnessing a revolution in our social networks is not unusual.
SocialFi connects you to people with similar interests and allows you to discover various contents. It is not a blockchain; it uses blockchain technology to present users with more secure, transparent, and trusted transactions.
SocialFi offers adequate and efficient means for users to manage, create and handle their own social media content. Like in GameFi where we see two concepts unite, SociaFi combines the principles of social media and decentralized finance using a Web3 model.
It is built on the principle of decentralization as its distribution authority is not centralized on a person or group. Social media is arguably a platform that connects and entertains people through various applications, and it allows users to participate in various unique activities on it network. Web3 through SocialFi has presented a solution for accelerated social networking.
SocialFi, an abbreviation of Social Finance, is a web social banking platform that supports peer-to-peer (P2P) lending and other operations.
In SocialFi, users can share real, trusted and verifiable trading guilds, accumulate reputation on the chain and earn social mining rewards.
It is probably the most intense jump to Web3 today because it is highly publicized by bloggers, influencers etc. at some point. It has the characteristics of decentralization, openness and user control.
SocialFi platforms focus on create-to-earn, engage-to-earn and invest-to-earn. This platform provides various services that allow users to earn, such as social trading, staking, yield farming, NFT marketplace, and much more.
SocialFi networks spread the data throughout the web by nodes, and everyone who helps maintain functionality is rewarded financially.
It helps users earn income through content creation, participation, communicating with other users, watching videos etc. and gives users adequate control over the content they post while allowing them to earn income.
It did not stop here; they took it further by allowing users to earn through decentralized activities like gaming, communication etc.
SocialFi has two main ways users can earn revenue, and the first is through creating content. Users create content and wait for rewards from followers. The next one is write-to-earn which is similar to play-to-earn. This gives writers a chance to earn through their writing.
Web2.0 Social media VS Web3.0 SocialFi
Traditional social media has made a big wave in aiding communication and bringing people of interest together, irrespective of distance and race. However, a lot of limitations accompany it, which Web 3.0 exists to solve.
The social media we are all familiar with controls the user’s online identity and data. In this case, the data generated by users is being converted into money by third-party networks.
The major data operators control users’ data; they use the underlying social data to make profits (data scams) while users get little benefits.
The users have little to no data rights, but the case is different with SocialFi. Using blockchain technology, SocialFi sets out to make user data collection transparent and impossible to tamper with. Through a framework known as Self-Sovereign Identity, users own and control their data and digital identity.
In the traditional social media model, we see cases of centralized decision-making where some contents were censored or the creators were banned from engaging in such topics.
Although the idea is to protect the users on the platform from harmful information and content, it has been abused over time due to centralized authority.
The network operators get to decide what contents should be seen or censored, but this will be a thing of the past with the emergence of SocialFi as it is being run on a decentralized curation process powered by the community.
SocialFi creates an ecosystem where content creators or users enjoy freedom of speech, which is achieved through labelling on-chain data. It is up to the nodes on the chain to choose the right posts, not a centralized authority.
Another distinguishing factor is benefit distribution. Social media platforms make money by selling ads based on their user traffic.
The platform gains from greater trafficking engagements in the form of billions of ad income, while the users only benefit through being able to be on the platform.
Many SocialFi projects see this benefit distribution as unequal and set out to make way for users to monetize their social influence, which is made possible by the DAO model. SocialFi apps use the concept of social tokens or in-app utility tokens where creators can manage their own economies.
Fourthly, in traditional social networking, all account registration requires information such as cell phone number, email address, etc. which is stored in the operator’s back-end and is unprotected from leakage.
This leads to the common instance of someone’s account being hacked or the user’s private information hijacked. SocialFi is based on blockchain technology, and the anonymous nature of user identity information helps to protect privacy and security for the users highly.
SocialFi is invested in protecting users’ privacy through a framework regarded as Privacy-Preserving Analytics which allows data analysis while protecting users’ anonymity.
Summarily, unlike Web 2.0 social networks, SocialFi is centred on protecting and securing user data, distributing advertising revenue equitably and delivering a more exciting user experience.
Challenges SocialFi must address
One major challenge the platform may face, like every other new innovation, is getting people to switch to using the platform.
Most people are afraid of change, so the SocialFi developers may need to devise a persuasive strategy to propel users into switching from traditional social media to SocialFi.
Another major challenge is scalable infrastructure. As the number of users on SocialFi continues to rise, the platform will need to handle the increase in demand.
This is a common challenge for any decentralized platform. The problem lies in if the blockchain can handle the size of volumes generated every minute. However, they are taking measures to take care of this issue using a blockchain layer known as ‘Deso’.
It is being reported that SocialFi apps are to be built on it blockchain, which they believe will scale better than the existing layer-1 chain. They use indexing, block size management, wrap sync and sharding to solve their scalability problems.
Another challenging factor is establishing an economic model that can endure stress and inconsistencies. Several platforms, such as GameFi or SocialFi, have made enticing promises of rewards for users for participating, but these have turned out to be short-term development hacks.
These rewards or incentives are still being tested on a small scale, but before general adoption, these models need to be open to several market cycles and black swan events.
The monopoly of influence is another challenge of SocialFi, it is essentially a manifestation of personal value, which is expressed visually in the form of money. For users that signed up early or influencers, this will somehow expand their monopoly on content creation.
While for people that signed up late or general users who aren’t influential, their content is often too difficult to be discovered. This calls for a re-evaluation or improvement of the value capture model.
Most SocialFi projects are based on token issuance, making social tokens the core of these projects. There are different types of tokens;
- Personal Tokens
- Community Tokens
- Social Platform Tokens
Through the social tokens, the creators can now handle their own resources, and this token’s value will be directly proportional to the user’s social influence.
This further means that an ordinary user just starting off will have a lesser token when compared to advanced users. Core principles underline this model as it concerns social tokens in relation to how far you can go on the SocialFi app and the level of your interactions. And they include;
- Users who hold a creator’s social token can interact with their posts. If you want to engage with Mark Zuckerberg’s posts or content, you must have his social token in your wallet.
- If you hold the highest number of an influencer’s social token, you can get their attention quickly by having your message listed at the top of the responses. This means that if I want to get the attention of a famous person, I just have to acquire the highest number of their social tokens.
Others include influencers and creators setting an entrance that will allow followers with more than a particular number of their social tokens to directly message them, users investing their money to engage with someone’s content etc.
Some SocialFi platforms include;
- PeakD
- Ecency
- ApolloFi
- Nafter
- Coinvise
- Mask Network
- Chingari
- Mirror
- Hive Blog
- Rally
Future of SocialFi
SocialFi presents a platform different from the traditional social media we are acquainted with. SocialFi delegates the community of users to govern its affairs, thus making it decentralized.
SocialFi is the fusion of Web3 and social media on a blockchain with a financial part. Here, users get to be part of a revolutionizing structure where they make money by creating content, taking part in DAO governance, minting NFTs, playing games etc.
Despite its challenges, it has promising potential to sweep the globe changing everything we know about social media.
It is gradually changing a lot of things we know about social media by removing all the flaws but still maintaining what made them great in the first place.
Still, in its earliest stages of development, SocialFi requires a better and more secure infrastructure in order to deliver a creator-based economy and attain its heights.
