Social Media (SM) and Decentralised Finance (DeFi) – what could these two possibly have in common? A lot, it appears. SocialFi, an amalgamation of these two major concepts, is one of the most interesting, even if still small, areas in the crypto world. In this article, we will take a closer look at the emerging niche of SocialFi.
What Is SocialFi?
SocialFi, derived from the combination of the words “social and “finance”, is a relatively new crypto term that may refer to two primary concepts:
1. Blockchain-based SM protocols that offer crypto monetisation or DeFi opportunities. These may involve NFTs or crypto coins that platform users may earn or trade via the protocol.
2. Crypto and NFT features that are used or might be used in the future on traditional SM platforms, such as Facebook, Twitter, Instagram, or YouTube. While these SM platforms are not blockchain-based, they are currently incorporating some crypto elements, e.g., NFT avatars, into their functionality.
Blockchain-based SM platforms are still small and unassuming compared to their internet rivals. However, as this niche is developing, we will likely hear more about SocialFi and these platforms over the next few years.
SocialFi in Blockchain-Based SM
A number of blockchain-based SM platforms have introduced crypto monetisation opportunities using their native cryptocurrencies or NFTs.
One of the oldest crypto SM projects is Steemit, a blogging and SM platform built on the Steem blockchain. Steemit allows bloggers to monetise their work using the platform’s crypto coin, STEEM. Authors whose articles receive significant upvotes and rise in popularity rankings have a chance to earn meaningful income from the platform. One of the pioneers of SocialFi, Steemit reached its pinnacle a couple of years ago but has since experience a significant decline in popularity. Curiously, the platform is still very popular in South Korea. A visitor to Steemit’s homepage may quickly notice that the Korean language posts dominate over English or any other language content.
Another popular SocialFi platform is the Talent Protocol, an Ethereum app that lets its users create their own branded tokens and monetise their expertise and services using the tokens.
Professionals from a variety of industries use the Talent Protocol. The platform might be considered a form of freelancing marketplace, with crypto underpinning its operations. Each service provider on the Talent Protocol has a set of metrics, such as the “personal market cap” and the number of supporters, that help them demonstrate and market their talents.
While SocialFi is a smart concept, it is by no means an established niche. Most SocialFi platforms are small. There are many SocialFi apps that started out successfully but became casualties of the volatile crypto industry. Rally, an Ethereum-based protocol that allowed users to create their own custom social tokens, was another pioneering SocialFi platform. Rally used a social monetisation concept similar to that of the Talent Protocol. Users could create their custom social tokens to offer their consulting services or artwork. Rally focused on creative industry professionals and SM influencers.
However, the platform shut down in early 2023, citing the “challenging year” 2022 as the key reason. No further explanation for the abrupt shut-down was given. It’s possible that the narrow focus on creative industries only limited the growth potential of Rally.
Rally’s case shows that the SocialFi niche is still finding its footing. The dominance of the internet-based SM giants, Facebook, Twitter, Reddit, YouTube, Instagram, is also a challenge for purely blockchain-based SocialFi platforms.
SocialFi Elements in Traditional SM
Blockchain-based SM platforms are not the only ones trying to leverage crypto in their functionality. Some traditional SM giants, such as Facebook, Instagram, YouTube, and Twitter, have implemented or considered new crypto-related functions, such as NFT avatars and crypto monetisation, for influencers and others who would like to build their personal brands or offer services through these popular SM websites.
However, most of the discussion related to the use of crypto in traditional SM has so far focused on NFT avatars. Cryptocurrency-based monetisation of services has so far received much less love from the leading SM platforms.
However, it’s likely we will witness a significant growth in crypto monetisation opportunities on traditional media within the next couple of years. At least, those who want to see these platforms offer more functionality hope so. SocialFi has arrived, and it is up to these leading SM platforms to adopt it and continue leading or, alternatively, stay oblivious to it and ultimately pay the price.