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SocialFi is an attempt by the web3 industry to solve the problem of digital content monetization, the genuine problem that affects millions of talented creators around the world.
From the perspective of everyday users, it can be hard to see creators struggling. However, despite producing quality content on a daily basis, the vast majority of them are not making any money at all. Many SocialFi projects have been launched in recent years with the aim of solving this part of monetization by rewarding every digital interaction for both creators and users. Unfortunately, most seem to have missed the mark by relying too heavily on decentralization aspects instead of offering real solutions to existing problems.
The origins of mass interest in this space came during the pandemic lockdowns. With the idea of pursuing a career based on passion becoming more widespread, the future of social monetization catapulted into a new phase of growth. This was also a time when the crypto industry saw a massive influx of retail investors, with industry narratives moving towards building pragmatic, real-world solutions. This led to significant advancement in the SocialFi movement, and much has been achieved since then in terms of on-chain innovation, tokenized community governance, nft integration, and other DeFi products that authentically bridge the problems surrounding creator monetization and user rewards.
However, as a sector that claims to be the future of the trillion-dollar creator and freelance economy, the modest market cap of SocialFi tokens is on $2 billion. This indicates that the sector has a long way to go to establish itself as a global financial ecosystem. Let's compare this to the market capitalization of DeFi (crypto/?sh=26d3407f7493″ target=”_blank” rel=”nofollow”>around 70 billion dollars) or even nft (nft” target=”_blank” rel=”nofollow”>around $62 billion), and it's clear that SocialFi has a long way to go.
Fortunately, there are signs that SocialFi platforms and the utility tokens that power them have a bright future. This is seen in the significant volume of new users willing to join a newly launched SocialFi platform. Sure, many of these users are just there for the free rewards, but that is the current norm for web3, whether they like it or not.
The benefits of SocialFi
To benefit from this early user traction, SocialFi developers need to be realistic with themselves when designing a product. The reality is that very few creators care about (or will even benefit from) decentralized ownership of content or on-chain proof of intellectual property rights. While this is a widely marketed USP on Web3, it only benefits the top 1% of famous creators in the world.
What about the masses? What unique selling proposition will enable them to capture their attention and loyalty? The answer to this question holds the solution for social finance platforms to finally gain market share against Big tech platforms, and building hybrid ecosystems is critical to this. This means merging blockchain features (such as tokenization) with non-blockchain architecture, providing an intuitive and seamless user experience for the masses.
While DeFi and blockchain technologies have a variety of clear benefits and values, mass adoption will not happen if Web2 users are required to overcome the Web3 wall of creating a digital wallet, storing a 20-word seed phrase, and interacting with an unfamiliar user experience. If creating an account is harder than starting an instagram account, then 95% of all potential users have already been lost. From a user experience standpoint, people cannot be limited by the intimidating gates of Web3.
Appealing to the masses
Winners of this space will focus on mass-appealing narrative, building a community of true creators, empowering them with Web3 education, and implementing real-world token utility into a seamless user experience. That’s the formula for SocialFi’s success.
The SocialFi community is certainly rising to these challenges, and 2024 remains a pivotal year for projects in this space. The current wave of innovation is the most exciting, as projects implement user-centric features that focus on user experience and build on the value that traditional platforms have already created for the creator community. Tokens are important, but as a secondary driver of growth, and should only exist as a means to improve user experience. This realization will shape the sector going forward.
