The Finance In SocialFi is Broken And That's Hurting Its Growth

Like most things crypto and web3, SocialFi is one of the worst innovation branding terms there is in this ecosystem.

The branding flaw of web3 is something I've talked about on a few occasions and it's played a detrimental role in its marketing.

Starting with the word web3, most early adopters will agree that emerging projects within this ecosystem have taken a shot at oversimplifying this term, so as to fit whatever narratives aligns with their product or service, which most times never get to maturity because the goals are never set on the transition to actual web3, but a game of securing VC funding, rewarding the team, then build hype so VCs can dump all associated assets.

To the average user, this all might sound like just speculations or a try at controversy, but a careful long at the hard avaliable data on VCs funding paints a clear picture, not to mention recent legal entanglements of market makers.

Not sure what MMs have to do with this?

Well, retail for a start aren't heavily liquid individuals, they are the average guys who typically respond to FOMO. As such, to sell out to retail, one will need more liquid people to temporarily hold positions, build volume and momentum working hand in hand with social marketing to prompt action with retail investors.

This is illegal, depending on who you ask, but some of it is a necessary process that simply gets abused.

Moving forward, the cryptocurrency ecosystem, web3, whatever you want to call it at this point is not just technologically imperfect for the masses(currently), it also suffers a brand problem, therefore limiting effective education of the masses.

When it comes to SocialFi, calling out the branding flaw is not only essential for the correction of public knowledge, but to aid business developers better tailor their products and services to the right market.

Oh my god, I sound like a nerd for a second there.

Let me rephrase that.

SocialFi is a broad concept. Though when we sought public definitions, we get something like this:

SocialFi (short for Social Finance) is a fusion of social media and decentralized finance (DeFi), leveraging blockchain technology to create a new ecosystem where social interactions and financial systems are integrated. It aims to incentivize users for their participation, content creation, and engagement on social platforms using token-based rewards and decentralized ownership. - GPT.

It goes way beyond this.

Social media is a huge ecosystem, on its own, and finance is an even bigger industry, fusing the two creates a hot mess, especially considering that both are structurally flawed, individually, and have to rely on unethical management decisions to hold it up.

This is why social platforms sell user data and the government wants all your money.

To bring both ecosystems into one, and expect that “tokenization” will simply fix it, magically, is an underestimation of how big of a problem needs to be solved here.

If we have to ignore every other aspects of finance that will be integrated to social media, through the introduction of SocialFi and focus only on the concept of tokenized and incentivized social platforms rewarding users for their valuable contributions, we still have a long line of problems that have evidently led to the failure of this ecosystem.

First off, tying finance with social media leads to the erosion of social values.

SocialFi sacrifices genuine human connections for transactional relationships. It's the blockchain, everybody can see your wallet, so are you rich? you'll probably have more followers, even when you don't post a damn reasonable thing.

There's prove laying around that this happens even on Hive. But it goes beyond just whale watching, it also makes people not financially buoyant to not want to get involved.

How do you think your poor neighbor will feel about having a social account that's also a public wallet with not millions inside like yours?

Exactly.

Secondly, there's largely too much emphasis on rewards when it comes to SocialFi.

Which is kind of stupid considering that the finance in SocialFi should mean more than creator rewards, but that's all we talk about.

This first impression does not appeal to the consumer market, it simply turns everybody into entitled, money thirsty users.

That, is something SocialFi cannot afford.

There's a reason why you don't think about making a post to earn money when you first download YouTube or Facebook to create an account.

Do I have any better ideas?

For now, just concerns that web3 social media, you know, the one we all call SocialFi, that's focused on “rewarding creators” will always remain small, unless we can figure out a way to distance the industry from over-promising riches to people that should have just been regular content consumers.

Of a surety, there's a lot more to unpack on this topic, but I'm already far beyond the average content consumers attention span and there's a high chance the people reading this is 80% of the time, a creator, rather than a consumer, so I'm reaching further into a far more limited attention span.