SocialFi is an area within the web3 space that I have been very critical of pretty much since I could remember. The idea of having platforms that are decentralized and pay users for the content they create is nice in theory but has been poorly executed by so many people that the mere idea of another platform spinning up makes me lose brain cells.

I am not a hater, I just think that building a social media (in general) is very hard and the incentives that are being laid out by the crypto bros that build these things are bad. You are going with the same approaches as your predecessors, all of which have failed. Anytime I see a new platform spin up and catch buzz in the small world of crypto I think to myself “Here we go again”.

In this post, I will lay out my thoughts on the space in general, if I think we need something like decentralized social media platforms, and why I am overall bearish on the concept to begin with. But first, let’s talk about what SocialFi is.

What is SocialFi?

SocialFi’s goal is to bring together the principles of social media and decentralized finance. Users own their data and can make money from the content they create.

At the heart of socialfi the apps are out to make influencers and participants more in control of the following:

• Owning their data (which most don’t care about)

• Offer freedom of speech (cool, Twitter offers it)

• Offer the ability to monetize their social media followings and engagement (already exists on all platforms).

On a socialfi platform, monetization typically occurs through the issuance of a token which, like most tokens out there in the market, ends up being a useless governance token (DeSco).

Obviously, I am being critical here but do you see the point I am trying to make?

None of the platforms are offering anything new that has not existed in the marketplace already. There are obvious issues with web2 social platforms (censorship and the monetization of people’s data) but I am not sure how big of a motivating factor those two things are in getting people to completely use different platforms.

With the rise of platforms like Rumble, you saw it a little bit but you won’t really see the shift until more creators build on the platforms with the hopes of getting famous. Why did everyone rush to being on TikTok the past couple of years? Because that is where attention was and that’s where people can get famous. Humans act off emotion, just because your platform makes sense logically does not mean that it will convince someone to move over there.

I understand that all these platforms have to start somewhere and grow a natural audience but nothing will work if people are not incentivized with the idea that building on your platform will make them have more status in society that they so desperately want (and need) to feel seen. Social followings equal social standing in our world today and to get more people to buy into your new social app you need to give them the ability to do so. But there is a balance here, being famous on a platform that your friends aren’t using defeats the purpose of having more status than others.

Problems with the Current State of SocialFi Projects?

Attention is a scarce resource. Getting people’s attention on your app is not an easy business to tackle. There is a lot of money in the socialfi narrative and that’s why I think we continue to see people chase after the narrative to begin with but there are a number of problems that I see pop up time and time again.

I am always open to having my mind changed and even admit when I am wrong but I will double down and be critical of things when I see the same things play out. Let’s look at Meta, they are obviously one of the biggest players in the space and even they failed most recently with their Twitter copy-cat Threads.

If they have a hard time shifting over people’s habits and gaining traction on a new social media platform, chances are it is going to be even harder for an upstart crypto bro.

Here are the Issues I See With SocialFi Today

• Incentives right now for people to join are centered around coins and money this makes the app less about being social and feel more PvP. Most of these socialfi projects have felt more like a game than a place where people connect and share things about their lives with people they know/don’t know. TikTok and IG did not get where they are incentivizing people with money, they did it with the allure that you could get famous on their platform if you continued to post on it.

• There are little to no women on the platform or using the applications. Women are the biggest consumer segment in the world by a wide margin, you have to find a way to attract women to your platforms. This in turn creates a positive loop. Most of the attention on social media is a drug that gets people to come back. If girls are on your platform, more guys will flock to it and start to use the app… that is just the nature of the beast.

• User interaction with anything related to crypto is not seamless enough to replace apps like Instagram, Snapchat, TikTok, Twitter, or Facebook. Little to no differentiation makes apps less appealing. Some people are attracted to the allure of money making money but attention will go where people can have the allure of getting famous.

• Little to no differentiation between your app versus the 5 major players that dominate the market as stated above gives people no reason to download your app and try something new.

Building a Social Media [Incentives & Audiences]

Sure maybe your goal is not to be a huge social media platform like an Instagram or TikTok, and in that case maybe this post may not apply to what you are building. But if we are going with the idea that crypto and blockchain technology is here to disrupt everything these large social media platforms come into question.

Again, I have said it here and I will say it again. You have to find a way to 1) get women to care and download the app at scale and 2) Incentivize people with the ability to change their lives by giving them fame. TikTok is such a perfect example and they applied these two things masterfully. If you look at the early days of any of these mega-large social platforms their organic reach was insane.

But even with great organic reach you still have to attract people to your platform. Which do you go after first? The consumers or the creators?

UX & Engagement

Up until maybe a couple of months ago, most of crypto has been too slow and clunky to be adopted to the point where a viable social media app would be able to spin up. Gas fees were too high, UX too compartmentalized, and engagement was low because nUmBeR WasS nOt uP!!11

The engagement with the crypto space is now coming back because number has definitely gone up but you now have an issue of fragmentation upon the layer 2s and places like Solana. Gas fees across the board have been pretty much solved but now we need everything consolidated into one place. Maybe then something can be built on top of that (in my humble opinion).

Why Web2 Platforms Won’t Be Replaced

I think there is a healthy mix of “right time, right place” with a lot of these social media platforms and a complete overhaul of their usage just seems like a pipe dream. Clearly, I am not sold on the idea of SocialFi as a whole. It sounds nice on paper but what sounds nice and what people do are not always the same thing, you know this and everyone with a working brain knows this, just study relationship dynamics.

MySpace Had Everyone Connecting [Created The Demand] Then Facebook Won

The rise of social media platforms in the early 2000s was something that I was young enough to hear about but not old enough to truly experience. I remember begging my mom for a Myspace and her telling me no, only to go secretly make Facebook accounts at my friend’s house since they had a working computer.

Looking back at those days, social medias were novel, they were the new hot thing. Everyone wanted to send friend requests and connect with old friends that have not seen in forever.

Now, it is a whole new ball game. We have had almost 20 years of being hyper-connected on these apps. Every platform is fighting for our attention from every angle and is apart of everyday life. The excitement to jump from one app to the next is not as alluring as it once was and I don’t see people making these jumps unless incentivized properly.

The Promise of SocialFi

Digital ownership, censorship-free platforms, and making money for creating all sound incredible and I will applaud those who try to tackle the challenge of building a SocialFi platform that competes with the likes of Facebook, Instagram, or even TikTok. The only way I see someone taking market share with this is through gaming. If there is a game that catches enough attention (like a Fortnite-sized game) this could change my mind and that is maybe then we could start seeing the promises of SocialFi play out.

I have been reading Ready Player One and the idea of SocialFi is imbedded into the book. The Oasis was not only a place to jump from world to world to play games but it was also a place to chat with people and connect with others from across the globe. The person who is tackling building the Oasis is probably the person who takes the most share out of the SocialFi narrative.

Some of you may agree or disagree with me but these are my unfiltered thoughts about SocialFi.

Remember Digital Whale Club will never offer up financial advice. Always do your own research, I am just a sales guy with experience in the crypto space who enjoys writing, investing, and BJJ. Be sure to follow us on Twitter, subscribe to our YouTube, and join the discussion in our Reddit community.