What is SocialFi? An Overview of SocialFi Landscape in 2024

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We’ll provide a comprehensive overview of the SocialFi landscape, in terms of statistics, notable projects, and investments.

SocialFi is the fusion of Web3 and social networking. This concept merges ideas from social media and decentralized finance (DeFi) to create, control, and own user-generated content on various platforms.

Follow Pink Brains as we delve into SocialFi, one of the latest crypto narratives in 2024.

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Table of Content

  1. What is SocialFi?
  2. How does SocialFi Change The Way We Socialize?
  3. SocialFi Landscape in 2024
  4. Achievements and Highlights
  5. The Future of SocialFi
  6. Conclusions

1. What Is SocialFi?

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SocialFi combines the features of social networks with decentralized finance (DeFi). SocialFi platforms offer a Web3 solution for creating, managing, and owning social media accounts and content.

Read more: Top 7 DeFi Trends in 2024

What sets SocialFi apart is that content creators, influencers, and members have better control over their data, freedom of speech, and the ability to monetize their social interactions.

Typically, cryptocurrency empowers monetization in SocialFi, while identity management and digital ownership are enhanced through NFT and blockchain technology.

SocialFi projects are often developed and governed as decentralized autonomous organizations (DAOs) to prevent centralized censorship decisions. With the significant advancements in blockchain technology in recent years, the SocialFi infrastructure can handle the necessary processing for social interactions.

Although SocialFi is still in its early stages of development, it has great potential to become a significant trend in the future. It could revolutionize the way we interact with each other and how we trade assets in the digital environment.

2. How does SocialFi Change The Way We Socialize?

In the saturated world of Web2 social networking, SocialFi projects are seen as a fresh direction, emphasizing the protection of free speech and data ownership protection. Blockchain technology has the capability to decentralize various traditional sectors, especially social networking platforms. With Web 3.0 technology, SocialFi platforms can change the way we socialize in the next 5 years for the following reasons.

Anti-Censorship & Immutable Data on Blockchain

Freedom of speech is vital for social platforms, though with limits. Traditional social platforms control our data, dictating online narratives and removing users at will. A recent example is when Elon Musk took over Twitter (now “X”), the internal documents revealed Twitter’s censorship based on government requests or perceived threats.

In Web2 social networks, users never truly own their identity or voice. SocialFi addresses this. While SocialFi apps can be censored, users retain ownership and can switch apps, taking their data with them due to the fact that their on-chain footprints are immutable and can’t be deleted on the blockchain.

The key principle is that users aren’t locked into one app and can migrate with their data anytime. This allows users to create any content and post any information without fear of censorship or removal from the platform.

Data Ownership, More Transparency

To kick off this topic, we’d like to pose a question: Do you believe social media can influence a country’s development?

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Today’s social apps use intricate “Social Graphs” to offer engaging experiences, mapping user relationships and interactions. In Web 2.0, these networks are privately owned by big corporations.

The content algorithms of platforms like Facebook, TikTok, and other social media networks remain mysteries known only to their respective development teams. These platforms have the capability to understand the psychology of each user, curating content they prefer, which in turn makes users retain even more time on the platform.

SocialFi aims for transparency with user-controlled “open data.” This allows seamless transitions between apps built on the same network, avoiding duplication. Imagine Joe Rogan leaving Spotify due to restricted access to fans and content, needing to start afresh elsewhere. With SocialFi, this isn’t an issue, but it’s a significant challenge for artists on Web2 platforms. They can sell their personal works to everyone and reap the profits rather than passively discovering that their data has been sold without recourse.

Fun fact: Do you know who’s leading the charge in social media source code transparency? It’s Elon Musk. X (formerly known as Twitter) “open-sourced” a portion of its code earlier in April this year.

Connectivity and Compatibility

One of SocialFi’s standout features is its exceptional connectivity and compatibility.

Consider this example: You have a Facebook account with 100,000 followers and over 10,000 posts. You prefer Twitter and want to switch. Three challenges arise:

  1. You need to set up a separate Twitter account (email, phone number, username, password, etc.).
  2. You’d have to repost all your Facebook content if you want it on Twitter.
  3. You’d need to ask your Facebook followers to follow you on Twitter.

Since users lack actual control over their data, leading to isolated experiences across platforms, starting on a new platform means rebuilding connections and history.

With Decentralized Social, these three steps can be completed in just a few clicks.

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SocialFi platforms on the blockchain offer extensive compatibility with smart contracts and other protocols. This open structure lets developers seamlessly integrate with Web3 Social tools, turning content into NFTs for sale, a feature missing in isolated Web2 platforms.

With open data, developers can blend their platforms with everything from DeFi to metaverse games and NFTs. For example, Warpcast, based on the Farcaster protocol, connects users with similar NFT communities or ENS domains, creating a unified on-chain ID. Other platforms, like Phaver, let users consolidate their Lens Profile or ENS domain into one profile.

As a result, when you join SocialFi, all your information is stored in a unique social graph you own and manage. This includes personal details, social connections, and posted content. This social graph layer is distinct from the dApps built on it. So, when moving from one dApp to another, you simply connect your wallet, approve what you want, and you’re done!

Community Building and Growth

Blockchain infrastructure powerfully unites people for shared goals. We’ve seen this with token-empowered communities like ConstitutionDAO’s U.S. Constitution bid, DeFi protocol governance (e.g., Uniswap, Maker), digital art investments (e.g., PleasrDAO), and NFT collection-based social clubs.

Innovations like Dynamic NFT combined with emerging SocialFi protocols elevate these experiences. Integrating real-world data into Web3 can further enhance this. For instance, instant communities can form around purchases, relationships, and new trade forms. Imagine a Web3 social network linked by unified identities (e.g., NFT profiles) that reference similar traits. Open, transparent data lets platforms auto-create communities based on shared profile characteristics.

In conclusion, SocialFi can be seen as an experiment in reshaping how we socialize in the future.

3. SocialFi Landscape in 2024

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SocialFi Landscape in 2024. Original Tweet

The year 2024 marked the emergence of SocialFi projects, bridging social media and decentralized finance. Let’s find out what makes this year a great year for SocialFi.

SocialFi Ecosystem and Notable Projects

The SocialFi ecosystem is rapidly expanding with various sub-segments. Broadly speaking, we can categorize it into three main layers:

Data & Blockchain Layer

This layer is responsible for data storage. Projects can opt to store data directly on the blockchain layer, use decentralized data storage services, or both. However, the common practice is to store in both places. Information related to user balances and on-chain activities is stored on the blockchain to ensure decentralization and security. Other details, like user-generated content, are stored in decentralized storage services to reduce costs.

IPFS, Arweave, and Filecoin have been long-standing names in decentralized data storage. A recent addition is Greenfield, developed by Binance, which was launched in February to serve Web3.

Social Infrastructure Layer

This can be considered the core layer of the SocialFi ecosystem, encompassing all the foundational infrastructure components serving SocialFi’s dApps.

The most crucial element is the Social Graph, which consists of protocols designed to build and manage each user’s social diagram.

Lens Protocol is currently the most attention-grabbing name in this domain. Additionally, we have CyberConnect, Hooked, and DeSo, all of which are actively operating in this sector.

The second sub-category within this layer is user identification protocols, known as “Identify.” Notable projects in this area include ENS, SpaceID, and Unstoppable Domains.

POAP projects, standing for Proof Of Attendance Protocol, also enhance user identification by providing evidence of participation. Notable projects: Galxe, QuestN, Zealy, Layer3.

Furthermore, there are tools to facilitate the transition from Web2 to Web3. A prime example is the Mask Network, which gained significant attention due to its rapid growth late last year.

Application Layer

The Application Layer is the most exciting aspect of SocialFi, not just because of its diversity but also because it drives user engagement in the ecosystem.

This layer is quite varied, and we’ve categorized it based on the intended use of the protocol. You can also classify it differently as you prefer.

  • Social Network: These are user-generated newsfeed-style social networks, similar to Facebook and Twitter. Notable projects include Hey (formerly Lenster), Farcaster, Phaver, and a new emerging rival friend.tech
  • Messaging: dApps that allow users to message each other. Notable projects: iMe
  • Publishing: Through these apps, users can create personal blogs and post content or courses. Notable projects: Mirror, Open Campus.
  • Video: Social networks focused on videos, akin to YouTube or TikTok. Notable projects: CosTV, Lenstube.
  • Music: Projects that enable users to upload and share music. Notable projects: Audius, Soundxyz.
  • Talent Network: Employment-focused social networks that connect talent with employers. Notable projects: Braintrust, Human Protocol.
  • Gaming: Those projects offer social platforms where publishers create games to attract users through incentivization. Notable projects: Hooked, Valhalla.
  • Social Token: Users can issue personal tokens through these platforms. Notable projects: Rally, BitClout, TryRoll.

Web2.5 Social Network

Social networks transitioning from Web2 to Web3, temporarily termed Web2.5, include platforms like X (Twitter), Threads (Meta), Reddit, and Binance Feed.

4. Achievements and Highlights

The Growth of Notable SocialFi Projects

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Active user count of Lens – Those who post at least once a week.

Lens Protocol revolutionizes the concept of social reputation by providing users with a unified social graph across multiple applications, leveraging blockchain technology. The protocol’s design facilitates seamless content and data portability across diverse platforms.

Lens Protocol has witnessed significant user traction, with monthly transactions surging to 4.2 million and active user count at over 30,000 users at all-time high in February 2024. 

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Farcaster Daily Active Users (DAU)

Farcaster is a protocol for building decentralized social apps. It is a sufficiently decentralized protocol where users control their data, and developers can build apps permissionlessly on the network.

Farcaster is maintaining stable growth in daily active users, around 1000–1500 reacting and casting users.

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Transaction volume on friend.tech.

Friend.tech offers a unique marketplace for users, allowing the buying and selling of keys associated with X accounts. The platform’s distinctive features include private chat access, airdropped rewards, and fee sharing, fostering a competitive landscape for eager users.

Despite initial concerns over its revenue model, Friend.tech has surged in popularity, amassing over 100,000 users and generating approximately $25 million within its first two weeks of launch. As of October 2, the platform’s Total Value Locked (TVL) had exceeded 30,000 ETH, reflecting its remarkable growth within the decentralized social media sphere.

Adoptions From Big Web2 Corps

In the blockchain industry, we’ve witnessed the support of technology and innovators. But what about outside the traditional market?

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Elon Musk, CEO of X, stands out as a leading figure in the SocialFi movement. Since acquiring Twitter and renaming it X, he’s been striving to transform it into a Web3 social platform. Initiatives include allowing NFTs as avatars, open-sourcing the platform, and, recently, introducing a revenue-sharing model. His actions align closely with DeFi principles.

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On the other side of the spectrum, Facebook is also making strides. Despite setbacks with projects like Diem, Novi, and even the Metaverse, Mark Zuckerberg continues to delve into DeFi, most recently with Threads. If you delve into its operational details, you might see that Threads sounds like a decentralized social network.

SocialFi Investments in 2023

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SocialFi Investment in Q3 2023. Source: Coin98 Analytics

5. The Future of SocialFi

SocialFi projects have introduced promising innovations, offering specific utilities that Web2 platforms are missing. However, the current state of Web3 Social has its limitations:

  • Present SocialFi projects deliver a less user-friendly experience than existing social platforms.
  • SocialFi data or content is restricted to the majority of regular users, making the SocialFi ecosystem less diverse.
  • It’s challenging for current SocialFi projects to directly compete with well-established Web2 social media platforms like Facebook and Twitter in terms of user experience and capital power. Instead of direct competition with Web2 apps, they could leverage unique Web3 features such as DeFi, NFTs, and other services to provide innovative utilities for users.

However, in the long run, we believe that Decentralized Social will explode thanks to its core advantages towards present social networks.

6. Conclusions

Twitter was founded in 2006 and took 5 years to reach 100 million users; it’s now been 17 years since its inception. Facebook was established in 2004, took 8 years to amass 1 billion users, and has been around for 19 years.

SocialFi is a relatively new concept that has gained attention in the past 2 years, and there hasn’t been any project going mainstream to non-crypto users. So, do you think we’re at the dawn or dusk of SocialFi? And how long will it take for SocialFi to acquire its first 100 million users?

Hopefully, through this article, you’ve grasped the strengths, weaknesses, potential, and challenges that SocialFi faces. Let’s continue to observe its growth and find answers to the above questions together.

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Disclaimer: This article serves informational purposes only and does not constitute financial advice. Conduct your own research before making investmendecisions.