Updated: May 20, 2024
SocialFi Business Models are Transforming the Internet
-- Kathy Tong, Quantitative Venture Investor Decasonic
Web3 is redefining the landscape of social media by introducing decentralized, user-centric platforms that promise enhanced privacy, control, and economic opportunities for users. This transformation, often referred to as SocialFi, leverages blockchain technology to create new paradigms of interaction and engagement. This article presents a market map of the SocialFi ecosystem, categorized into key sectors that shape the future of social networks.
Currently we are seeing a shift in the reach, retention and monetization that SocialFi has access to with creative tokenomics design and in-app engagement capabilities. We are also seeing a shift towards a community-centric model in social dApps engaging with users in multi-player experiences. The monetization component of SocialFi, often dubbed as “free money” is a powerful incentive that gives web3 an edge over non-monetary web2 products.
The trajectory of mainstream business models are evolving with Web3, further reducing friction in digital transactions and shifting the monetization engine from previous third-party advertisers, to directly rewarding consumers and communities. Memecoins attribute value to digital attention, points, and airdrops reward early adopters, while Web3 gaming and NFTs create opportunities for asymmetrical wealth creation.
SocialFi is innovating around incentives for speculators, with successful dApps embracing the rapid evolution of third party supported business models. The recent rise in technology also facilitates quicker convergence within the SocialFi stack.
The Intersection of Web3 and Social: The Powerful Trends Aligning Social Communities with Decentralized Finance
Aligned Economic Incentives: SocialFi networks integrate tokens to provide financial incentives for user participation and content creation. This capability enables creators to monetize their social presence directly. These economic models empower users by rewarding them with tokens for their contributions, thereby fostering a more engaged and active community. This shift not only democratizes access to revenue streams but also aligns the interests of users and platform developers.
User Generated Rich Media and Creative Expression: Web3 platforms are expanding the ways users can express themselves and interact through rich media and creative tools. Multimedia applications enable creators to tokenize their content and interact with their audience in novel ways. These platforms not only provide new revenue streams for artists and content creators through tokenization but also foster a more interactive and participatory digital culture.
Social Personalization: Social personalization refers to tailoring user experience based on individuals’ preferences and social interactions within their online persona. It may leverage user-specific data such as wallet activity, content engagement, social connections to provide a personalized experience unique to each user. Some aspects can include content recommendation, social graph analysis, customized UI/UX experience and community curation.
Enhanced Identity Solutions: Identity and credential systems in Web3 are evolving to offer more secure, verifiable, and privacy-preserving digital identities. These systems ensure that users can maintain control over their personal information while proving their identity in a trusted manner, offering more trust to dApps and more personalized interactions. Furthermore, in a world where AI is beginning to enable AI agents to work on our behalf, these Web3 identities can enhance the productivity and economic transactional capabilities of such AI powered software.
Application Interoperability and Social Infrastructure Composability: One of the significant advantages of Web3 technology is its emphasis on interoperability and composability. This means that various social applications and protocols can seamlessly interact and integrate with one another. With the recent rise in modularity, developers are enabled to build on existing infrastructure and users to move their data and assets across platforms without friction.
Enhanced User Ownership: Traditional social media platforms have centralized control over user data and content. In contrast, SocialFi networks distribute power among users, allowing them to own their data and control their interactions. Web3 shifts control from centralized entities to users, enabling greater user controls over privacy, content and data ownership.
Market Map Structure
X-Axis: This axis spans the spectrum of products, ranging from infrastructure to applications. It aligns with the standard layers of SocialFi: Social Infrastructure → Social Graphs → Social Interactions → Web3 Social Clients and Applications
Y-Axis: Here, we map the target audience, differentiating between web3 native use cases to mainstream accessible use cases.
Categories
Social Blockchains: Foundational blockchain networks designed specifically to support social applications and its unique feature sets.
Social Networking Protocols: Protocols that facilitate the development of decentralized social networks by providing the necessary tools and frameworks.
Memecoins: Tokens which started as internet memes, have become integral to social communities and help drive engagement and economic activity.
Identity and Credentials:
Identity: Provide decentralized identity systems that enhance privacy and security for users.
Credentials: Platforms that offer verifiable credentials, ensuring the authenticity of user data and activities.
Wallets: Digital wallets enable users to socialize and consume social feed content in-app as well as manage their assets and interact with dApps securely.
Access & Participation:
Access: Protocols that facilitate user and community access to decentralized channels through blockchain-based verification.
Quest to Earn: Platforms that offer incentives for users to engage in learning and completing tasks within the Web3 ecosystem.
DAO Tooling: Tools that facilitate the creation and management of DAOs and Web3 communities.
Feeds: Decentralized feed protocols enable users to curate and share content in a distributed manner.
Communities:
Messaging: Messaging services that provide secure and censor-proof communication channels for users.
Broadcast: Decentralized social applications that enable users to broadcast posts without relying on centralized servers.
Multi-Media Applications:
Art: Social applications whose post and primary medium of communication is visual.
Music: Social applications that offer decentralized music distribution and monetization for artists.
Video: Video-creation or video-sharing applications that leverage blockchain to improve content delivery and reward creators.
Entertainment:
Social Games: Blockchain-based social applications that combine social interaction with gaming or have a gamified component to social interaction.
Metaverse: Virtual worlds that provide immersive social experiences where users can interact, create, and trade in a digital economy.
Text-Based Applications:
Blogs: Platforms that offer decentralized blogging and content creation tools using primary text as medium.
Web2 Social: Traditional social media platforms, or Web 2.5 social, are exploring integrations with Web3 technologies to enhance user experience and security.
Financials: Social finance platforms that merge social media with financial services, enabling new forms of monetization and community support.
The SocialFi ecosystem is rapidly evolving, driven by innovations in blockchain technology and a growing demand for economically inclusive platforms. This market map highlights the diverse categories and key players that are shaping the future of social networks, offering a glimpse into a more interconnected, equitable, and dynamic digital landscape.
If you are among those pioneering at this intersection we encourage you to reach out to a team member at Decasonic to help drive this vision forward.
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