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Social media has revolutionized the way we communicate and interact. It has permanently sent the erstwhile telegram service into the coffers.
On average, we spend two hours on social media every day. Social media platforms have perpetually rewired our brains and made us accept a radically different world we live in or better or worse.
Undeniably, it’s now a key part of each of our lives. So much so that a person without social presence is sometimes labeled as a misfit.
However, the current market is dominated by Web 2.0 platforms such as Facebook, Instagram, Twitter and TikTok. These centralized players have monopolized the space, giving them the authority to not always operate in the user’s best interest.
How is SocialFi different
SocialFi is the latest offering from Web 3.0’s stable that intends to infiltrate the present status quo. In simple terms, SocialFi hort for ‘social finance’ is an amalgamation of social media and decentralized finance (DeFi).
Forged under the ethos of Web 3.0, SocialFi presents the opportunity to create, manage and own the content generated on a social media platform. As a result, participants have more control over their privacy and multiple ways to monetize their content and followers.
In short, SocialFi cuts through the equation and hands power back to the users.
The platforms work on the blockchain, and key decisions over tokenomics, content moderation and engagement are handled by decentralized autonomous organizations (DAOs).
What does it offer?
In September 2021, Facebook whistleblower Frances Haugen said that there were “conflicts of interest between what was good for the public and what was good for Facebook,” and consciously Facebook “chose to optimize for its own interests, like making more money.”
Even though such acquisitions were common back then, it was the first time an insider spoke out publicly on the issue. It kind of precipitated the belief that massive changes were necessary for social networks as we know them.
The personal data market is worth billions of dollars, making it quite lucrative for traditional social media platforms.
Every time you use a social media platform, they make you accept their terms and conditions, which often seek to collect personal data such as hobbies, health info, browsing history, etc. If you didn’t know, TikTok even collects biometric information about our faces and voices for as-of-yet unknown reasons.
In a Pew Research survey, 81% of respondents felt they have little to no control over how their personal information is used.
Social media is, of course, free but “if the product is free, you are the product.” Every year, a single user contributes about $36 to Google’s ad revenue.
Sure, Google isn’t a social network. However, the figure serves as a decent indicator of each user’s value to these megacorporations that make money by monetizing customer data.
There’s an apparent misalignment of interests. SocialFi’s current positioning as a decentralized platform intends to tackle such issues by letting users have significantly more control over their data.
Instead of holding everything on a centralized server, data will have to be stored through a series of web nodes. Thus, reducing the risks of breach and single point of failure.
Also, SocialFi unlocks a whole new world of financial autonomy. Firstly, the web nodes are rewarded for storing data, and secondly, there are plenty of avenues for influencers to monetize their content.
Current trends
Even though the space is just beginning to spread its wings, some platforms such as Aether an alternative to Reddit, Diamond a Twitter-like micro-blogging site and Torum have started to garner attention.
These apps primarily use social tokens to drive the economy. Influencers have the ability to manage their economy on the platform through these in-app social tokens.
They can, for instance, create their own utility token that fuels their mini economy. Holders of the particular token can interact with the influencer’s content as per the assigned privileges decided by the influencer.
If the influencer’s social clout increases, the token’s value also rises and vice versa. Thus, also providing followers an opportunity to grow along with their favorite influencer.
Integration of non-fungible tokens (NFTs) becomes much simpler with SocialFi apps. Anyone can directly mint and distribute NFTs on the platform without the hassle of using a third party.
Users can interact with NFTs more openly. While NFTs as avatars are already in use across several Web 2.0 platforms, SocialFi can also integrate the avatar with a futuristic metaverse.
Another lingering issue with traditional platforms is freedom of speech. Although free speech is more often than not misused in the online space, centralized platforms constantly face stark criticism for the way they manage hate content.
SocialFi can liberalize the whole ecosystem because it won’t be under the pressure of higher authorities such as state governments.
Challenges
As the internet shifts toward decentralization, SocialFi is destined to gain prominence.
However, a key challenge would be infrastructure. Facebook generates four petabytes of data every single day. This means for SocialFi to work, it needs to create storage capacity for millions of gigabytes.
Evidently, current tech isn’t yet ready to handle a massive user base, but expectations are that things should improve as systems get better.
Despite the prevailing challenges, SocialFi has the potential to add immense utilitarian value to the crypto and NFT space and drastically alter the way we communicate just like centralized social media platforms did in the 90s.
Liam Peak is the founder and CEO of the Web 3.0 publication company Coinmash. He specializes in covering blockchain, DeFi, NFTs and other crypto related topics.
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