Article by CryptoJelleNL
Over the past few months, SocialFi has been a hot topic. While the first wave of major attention has died down, data from Dune Analytics shows that the sector saw over half a billion dollars in transaction volume on Friend.tech alone, since its launch in August this year. Over 800,000 unique keys were traded by a roughly equal amount of traders who joined the platform at that same time.
Source: Dune Analytics
It's not the first time developers have tried to bridge the gap between social media and Web3, but Friend.tech is the first one that was able to really gain traction. In a time where platforms slowly roll out compensation structures for creators, platforms like OnlyFans seem to have paved the way for Friend.tech and others, bringing a pay-for-access model to crypto as well.
What is SocialFi?
SocialFi is more than just bridging the gap between social media and web3. In its bare essence, SocialFi aims to monetize social interactions, and uses the blockchain to do that, colliding social & finance into a single industry; SocialFi.
SocialFi platforms build on blockchain infrastructure – allowing creators to monetize their content more efficiently than traditional social media. At the forefront of the SocialFi trend is Friend.tech, a popular service that allows creators to share content with an exclusive group of users who have paid for access.
What sets Friend.tech apart from a product like OnlyFans is that on Friend.tech, access keys are tradeable. You can buy, and sell your access key – at either a profit or a loss. This is also how creators make money on there – as they make a commission on every transaction that involves their key, instead of selling access to the content directly. Friend.tech sells (and buys!) the keys, and collects fees – and a portion of those fees go to the creator.
As the chart below shows, the Friend.tech craze peaked in September. So much so, that we quickly saw new platforms – inspired by Friend.tech – come to life, on many different blockchains.
Source: Dune Analytics
The success of these platforms shows promise, but the people seem divided on whether or not SocialFi is here to stay. Now that the initial gold rush-esque success of Friendtech et al is over, time will have to tell whether or not SocialFi has a future in crypto.
The benefit of SocialFi being on-chain
One of my favorite questions to ask myself when I analyze or study a new crypto-trend is: why does this need to be on-chain, or why does this need a token? I usually struggle to answer this question, leading me to be disinterested in many new altcoin projects.
With SocialFi however, I have found a few distinct benefits to being on-chain. Firstly, users retain the ownership rights to their content – whereas some social media platforms automatically receive the rights to any content that is uploaded to their platforms.
The on-chain nature of SocialFi also results in full transparency, allowing users to verify the identity of SocialFi accounts, making it that much harder for imposter accounts to pull off the tricks they use on Twitter and Instagram.
In my opinion, one of the biggest benefits of SocialFi being built on blockchain infrastructure is that it results in freedom of speech. While popular social media networks maintain and enforce a long list of rules about what you can and cannot say on their platforms, SocialFi is mostly free of censorship. Being on the chain also means governments cannot pressure the network into de-platforming certain voices, ensuring that different opinions are heard - whether their government likes it or not.
SocialFi's challenges
While I'm a strong supporter of freedom of speech, complete freedom of speech does introduce certain problems. After all, a lack of censorship also enables bad actors to distribute harmful content – a challenge for the DAOs behind Friend.tech and other platforms to address.
And if SocialFi wants to become a success, it needs scalable infrastructure. After all, while Friend.tech generated about 6.4 million transactions over the course of months – Facebook generates similar amounts of data every minute, of every day. It's not to say that SocialFi will ever reach such levels of activity, but to handle even a portion of that data – blockchains will need to scale significantly.
Closing thoughts
All in all, while SocialFi certainly has potential, time will have to tell if the sector can make a lasting impact on the current social media landscape. In essence, the popular saying "we are early" holds true in this case as well. SocialFi is far from perfect, but the initial successes are hopeful. SocialFi platforms have real challenges to address before they can make a true bid for mainstream adoption.
Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO as well.
Check out his twitter: twitter.com/cryptojellenl
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