As technology evolves, the way we interact has evolved with it, becoming increasingly decentralized and consumer-focused. First, it was decentralized applications (dApps) and decentralized finance (DeFi), then Play-to-Earn (P2E), and now the new model making the rounds in the Web 3 space: SocialFi.

The name itself is drawn from coining the words ‘social media network' and ‘decentralized finance.' Like the other three Web 3 models mentioned, the concept of SocialFi pivots around decentralization, allowing users to earn while participating and experience true ownership on social media. Because it bridges the gap between Web 2.0 and DeFi, it's safe to view it as a Web 3.0 approach to social media as we know it.

What is SocialFi?

SocialFi combines social media with decentralized finance (DeFi), offering a decentralized way for users to create, manage, and own social media platforms and user-generated content. The absence of limitations to what can be monetized means that users get to enjoy multiple earning opportunities on follower count and engagements.

It's a refreshing change from the previous centralized approach which limits how much digital ownership users like influencers and creators have over their content as well as how much revenue they generate. Web 2 social media is largely designed to financially benefit platform owners and their shareholders. Even though half of the world's population spends at least 2 hours on social media, creators don't get their money's worth for how much attention they draw to certain social media platforms.

Another challenge with Web 2 social media is how much power centralized entities have over censorship. Content creators are susceptible to permanent bans without notice for sharing certain topics in their content. A good example is the TikTok account of popular Nigerian creator Martins Vincent Otse (VeryDarkMan)

These shortcomings champion the need for social media in social media spaces. And some brands are already stepping their foot on the gas. On March 8, 2024, Blockgames launched farming of their native token $BLOCK through social media engagements like tweets, retweets, quote tweets, likes, and comments about the platform

Just by creating or engaging on X posts relating to Blockgames, users get to accumulate points that will make them eligible for an airdrop from Block shortly. As of writing, this same model is being implemented by Param Gaming on X with $PARAM and the energy is over the roof. It's thrilling, and it's fun. And it's highly incentivized. What more could users ask for?

A lot! SocialFi is not exclusive to gaming alone. Let's explore what other opportunities it holds on social media.

How Does SocialFi Work?

It's simple. With SocialFi, creators, and influencers can establish their very own social tokens for followers to buy and earn rewards for every active engagement they make off their content. Their audience in turn also enjoys rewards for participation through these tokens.

Creators and influencers with large fan bases can commercialize on a bigger scale using subscription models and effective incentivization. It's a win-win situation for creators and the community they've worked so hard to build.

Here, SociaFi makes it possible for users to achieve three powerful things in today's economy:

• Freedom of speech

• Monetization

• Digital Ownership

How Can SocialFi Be Fully Established?

This question is a wake-up call that proves that though the concept of social media sounds too good to be true, its future is only secured when the technology itself is developed to surmount two challenges. They are:

• Feasible economic model

• Scalable infrastructure

Developing feasible economic models is a significant challenge in emerging sectors like GameFi and SocialFi. While these platforms offer juicy incentives like high rewards for participants, they often rely on short-term growth strategies. This simply means, that if the economic model of SocialFi fails to achieve sustainability, it can't achieve as much growth as it should.

The incentive structures of SocialFi are still in the experimental stage and need adequate testing across various market conditions and unforeseen events before widespread adoption. Investing in an influencer's social token, for instance, exposes users to risks associated with harmful content. A single damaging post can swiftly devalue the social token, leading to losses for participants across the platform.

In social media platforms, where influencers operate within close-knit communities, losses in one microeconomy can quickly spread, affecting the entire system.

Another major challenge is that of infrastructure. How scalable is SocialFi technology? These concerns are addressed by platforms like Deso which are committed to outperforming existing layer-1 chains using sharing, indexing, warp sync, and block-size management. This means that for instance, with every 6000 posts per second that X computes for 300 million users, Deso can compute 80 posts per second for a user base of 4 million.

Can SocialFi overcome these challenges?

We'll find out shortly. The technology already shows huge promise. Every day, we see Web 2.0 platforms like LinkedIn, Instagram, and others integrate models for the fast-rising creator economy. If social media networks can adopt the principles of DeFi and persevere through the challenges, the principle of SocialFi will be flawless and powerful enough to break limits.