SocialFi: Social Media on the Blockchain

What is SocialFi?

SocialFi is simply a combination of social media and Decentralized Finance (DeFi). Social media is the latest among the growing list of fields that stand to gain an advantage from blockchain technology. The idea behind SocialFi is the decentralization of social media applications, which is enabled through Web 3.0. Since Web 3.0 will focus on decentralized applications, and use blockchain technology, SocialFi is the perfect next step for it. These new SocialFi platforms will use the same premise as the existing social networks but enhance them through decentralization.

Users will own and have control in these networks. Additionally, the introduction of community tokens allows people to vote on any changes to decide the next step of the project, similar to DAOs, or Decentralized Autonomous Organizations. There is a potential to create applications that focus on creators where their work and privacy are protected. It allows users to make money not only from their content but also allows from other decentralized activities like minting their own NFTs and cryptocurrency-based gaming.

The need for SocialFi

Social media has become a very important part of our lives. In a survey done earlier this year, it was found that 58.4% of the world uses social media actively. This number is set to increase significantly.

However, large companies still have heavy control over traditional social media. And there have been multiple breaches regarding the privacy of users. As with any agency that involves intermediaries, the users face a loss of control.

SocialFi seeks to eliminate these intermediaries and bring control back to the users, along with providing more security.

Blockchain technology is aiding the emergence of new social media networks that can change the existing structure. For instance, SocialFi platforms can eliminate Incidents like privacy breaches, algorithm changes, user suspensions, and content censorship. This is possible only by eliminating central authority and ensuring that the platform is owned and run by the community.

SocialFi also includes the possibility to earn through social tokens. Tokenization of social influence on such networks will enable users to receive direct monetary benefits. The followers who buy these tokens then get special perks as decided by the creator of the token like meet and greets, exclusive content, or the right to vote in polls. Tokens like $PSG and $BAR are already making use of community tokens for exclusive merchandise and other perks using the Socios ecosystem.

Benefits of SocialFi

More freedom due to the decentralization of social networks.
Better privacy, as the users will directly have access to their data instead of large companies.
Enhanced security since no central party would hold the data collectively. Instead, several nodes within the network will handle it.
Direct income, without third-party fees through the use of social tokens.
SocialFi allows users to make money from their content and exclusive products.
Elimination of forced censorship.
Protection from deletion or deactivation of user accounts.

Challenges for SocialFi

The biggest challenges that SocialFi networks may face are scalability and sustainability. The existing major social media platforms generate a massive amount of data on a daily basis. This data exists in the form of likes, comments, shares, and reactions, apart from the actual posts and conversations that happen on their platforms.

Although blockchains are powerful and are able to handle large sets of data, can they really handle the amount of real-time data that social media networks do? Platforms like DeSo claim they can, through scaling solutions like indexing, block size management, and sharding.

However, the blockchain economy is still in its infancy, and SocialFi models are more so. So, whether they are sustainable enough to last through several market cycles remains to be seen. Mainstream adoption will only be possible when the SocialFi model seems to be sustainable.

Relation with Web 3.0, and the Metaverse

Despite the challenges, SocialFi platforms seem to be promising. As is clear from subscription-based models and the more recent frenzy of NFTs, people are beginning to believe in the value of creators. SocialFi platforms seem an extension of that belief.

SocialFi being based on the concept of decentralization is possible through Web 3.0. As opposed to the existing Web 2.0 social networks, SocialFi platforms will provide more benefits to the user, while ensuring decentralized handling of data.

The Metaverse uses a combination of Augmented Reality, Virtual Reality, and Artificial Intelligence, along with leveraging the power of the blockchain. Since Metaverse is a social ecosystem for users to meet and interact with through their avatars, SocialFi seems like a great fit for it. Hence, Web 3.0, and Metaverse seem to be very compatible, if not integral to SocialFi.

Please note that this article is an opinion, and does not represent financial advice by IN4X Global.

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