SocialFi: All-New Social Networking in Web3
Web3 is often referred to as the next generation of the Internet, and crypto wallets are considered the gateway to the world of Web3. To fully prepare you for a Web3 adventure, CoinEx Wallet has introduced a series of Web3 know-how articles, illustrating the current status and future development of the Web3 industry.
In the Web2 era, social networking is one of the greatest demands of Internet users. According to Statista, as of January 2023, a total of 5.16 billion people around the world are using the Internet, 4.76 billion of whom are active social media users. These figures tell us that social networking has become an essential component of the Internet.
Source: Statista
Flaws of Web2 Social Media Applications
Common social media apps include instant messaging services with strong interpersonal ties, as well as forums, social media networks, and blogs with weak ties. The former category includes apps such as Telegram, Skype, Whatsapp, LINE, and WeChat; whereas, weak-tie social media apps feature a wider range of use cases, covering communities like Reddit, social media networks like Twitter, and blogs like Medium.
As you spend more time on social networking platforms, you will find that the ads pushed to you are becoming more accurate. Maybe you just tweet a craving for burgers, and soon after, you will see a burger joint ad. All these issues stem from the profit mechanism of Web2 social networking platforms, which can obtain users’ personal data and exploit the data to earn revenue via demand-specific advertising and marketing.
Aside from that, on social media platforms like Twitter, users are the ones who are constantly creating content and value, but the advertising revenue recorded by such platforms is not reasonably shared with creators. Monopolistic social networking platforms control all the data and pricing decisions. As people become more aware of privacy protection and creator value, new business models are urgently needed to replace traditional social networking applications. As a result, SocialFi, an entirely new way for us to socialize, has come into being in Web3.
The SocialFi Solution
As its name implies, SocialFi is the combination of Social and Finance, which can be seen as a form of socialization built with the help of blockchain technology and tokenomics. In GameFi, users make earnings by playing games, i.e., Play-to-Earn, and there’s also a similar mechanism in SocialFi: users can create value and earn token rewards by simply socializing with others.
To guarantee data security and privacy, SocialFi apps commonly use blockchain technology, including decentralized storage and on-chain behavior records. Compared with Web2 social platforms that store data in centralized servers, SocialFi apps allow users to genuinely own their data.
In terms of content review, traditional social platforms occasionally delete or block user-created content due to external factors. For instance, Twitter has banned many accounts. For SocialFi apps, it is more difficult for organizations to exercise centralized control because blockchain is inherently immutable. From the perspective of openness and freedom, SocialFi apps are obviously superior.
As for creator earnings, SocialFi apps have a great advantage over Web2 apps, as a healthy economic model can encourage users to create better content. With SocialFi apps, users can create high-value content and build social influence, which are both major sources of user traffic, to earn more token rewards. In contrast, traditional social platforms often rely on ads and user data to generate revenue, which is not shared with creators. In SocialFi apps, users can make more earnings by creating high-quality content and engaging in social interactions. Furthermore, motivated by token rewards, SocialFi app users are more incentivized to create better content. Such an economic model encourages users to invest more time and effort in content creation, thereby empowering the development of social apps in the long run.
On the Internet, social apps are undoubtedly crucial, no wonder plenty of institutional investors and developers are confident in this category. Meanwhile, many iconic projects have emerged. For example, Damus, a social media platform backed by Twitter co-founder and former CEO Jack Dorsey, has been built on top of the Nostr protocol. New platforms also include Lens Protocol, a social graph system built by the Aave team on Polygon, Mirror, a blog launched on Arweave by a former a16z partner, and Mask Network, a Web3 plugin built on Twitter.
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