Crypto-Integrated Social Application: A Guide to Social-Fi

• Social-Fi is an emerging concept that combines social media and decentralized finance (DeFi) in the blockchain ecosystem, allowing users to monetize their activities by tokenizing social influence and engagement.
• Challenges for Social-Fi include driving adoption, scaling to accommodate users and transactions, establishing a sustainable economic model, and navigating complex regulatory compliance. Privacy, security, and the risk of scams are also concerns.
• Notable platforms integrating Social-Fi mechanics include X (formerly Twitter), Reddit and Friend.tech.

---

Another year, another blockchain use case. As technology continues to advance, a new approach is currently making waves in the web3 industry. 

Social-Fi, or Social Finance, which combines social media and decentralized finance (DeFi) within the blockchain ecosystem to allow users to monetize their activities, is now also emerging.

Social-Fi: When Social Media Meets Crypto

According to Forbes, there are currently 4.9 billion social media users out of 8 billion people around the globe. This number is even projected to increase to approximately 5.85 billion users by 2027. 

However, despite this number, only a few social media users are monetizing their content and endeavors. In fact, while there are about 200 million people who consider themselves content creators, only about four million, or 2% of them, have surpassed the 100,000 follower mark, according to online magazine Influencer Marketing Hub. Take note that for most platforms, more followers could translate to more earnings. 

In Social-Fi, the economic aspect of web3 is combined with the social engagement and outreach offered by web2 social media apps. It utilizes blockchain technology to provide social media users with greater control over their data and online interactions.

Basically, Social-Fi employs smart contracts and decentralized identity systems to empower users with ownership of their personal information, far from the current social media apps that centralize data control within a single entity.

Leveraging blockchain technology also enables crypto transactions. In Social-Fi, both creators and fans can benefit and earn crypto. 

Creators can receive direct support from fans, and fans can contribute without intermediaries. In essence, users can be rewarded for posting high-quality content and gaining traction, as social influence is tokenized.

Challenges and Risks: Is Social-Fi Sustainable? 

Like other novel technologies, Social-Fi is also set to face challenges and pose risks. 

One significant challenge, akin to the broader web3 industry, involves driving adoption. Convincing users to transition from familiar traditional platforms to the new blockchain-based Social-Fi can prove challenging due to the strong pull of familiarity and network effects. 

But once adoption is achieved, Social-Fi’s challenges do not end yet. Another challenge is ensuring that platforms can scale to handle large numbers of users and real-time transactions. As it deals with all its users, Social-Fi must also be able to develop a sustainable economic model.

Moreover, as there is still no definite legislation on web3, Social-Fi is set to face complex regulatory compliance as it must navigate a variety of legal frameworks.

As for risks, privacy and security must be guaranteed. With numerous hackers taking advantage of Web3 innovations, user credentials, sensitive information, and digital assets must be secured from potential security threats. 

In addition to security risks, scams are also a major concern for users of new technologies. Scammers are constantly looking for new ways to exploit inexperienced users, and new trends like Social-Fi may be taken as an opportunity.

(Read: Fear of Crypto Scams: Filipino’s Top Barrier to Enter)

From Web2 to Web3: Apps Integrating Social-Fi

X

X, formerly known as Twitter, is integrating Social-Fi mechanics by supporting non-fungible token (NFT) profile pictures (PFP) on its platform. Basically, it allows users to link their NFT wallets to their X accounts and verify their ownership of NFTs. This feature is still in beta testing and is only available to a select group of users

Also, last February, its CEO, Elon Musk, a known crypto enthusiast, expressed his desire to make the social media giant a payment center platform. 

Reddit

Just like Twitter, Reddit also supports NFT and even launched its own digital asset collection, through a partnership with NFT platform Nifty Gateway. Last April, it released the third generation of its Reddit Avatars, a total of 10.6 million NFTs created by over 100 NFT artists with various themes and styles.

Prior to that, it also released CryptoSnoo, a collection based on the platform’s logo, Snoo. 

The social app revealed Gen 1 in July 2022, selling out its premium collection a month later, and airdropped Snoo-based collections to high-karma users. 

In August, Reddit partnered with Polygon to create a marketplace for digital collections. Reddit Avatars Gen 2 sold out fast in September 2022, with a pair selling for 4.0 $ETH each (approximately ₱307,000.00).

Last month, after ‌speculation about Reddit changing its terms of service, the value of community-exclusive tokens MOON and BRICK significantly increased.

Friend.tech

Launched in August 2023, Friend.tech, a decentralized social application built on Coinbase’s layer two blockchain, enables X (formerly known as Twitter) personalities to issue shares on its platform in exchange for access to exclusive group chats.

The app’s beta testing phase includes point distribution to users over the first six months, encouraging genuine engagement. Users can buy and sell “Keys,” formerly known as “Shares,” tied to the Twitter accounts of personalities, granting access to private in-app chat rooms. 

As of now, Friend.tech has generated significant trading volume and revenue, marking a promising start for this innovative social tokenization protocol.

This article is published on BitPinas: Crypto-Integrated Social Application: A Guide to Social-Fi

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.