In the era of increasing digitization of social and economic life, blockchain is being used in newer and more innovative areas. One of them is SocialFi, a combination of social media with blockchain technology and decentralized finance (DeFi). What exactly is SocialFi? What are its differences from traditional social media, and what are the challenges standing in the way of its wide adoption?
What is SocialFi?
SocialFi, or Social Finance, is essentially a fairly new concept based on decentralized technologies that combines the functionalities of social media with DeFi mechanisms. SocialFi allows users to monetize their social media activity by tokenizing their activities. Users can earn cryptocurrency rewards when they post, comment, engage in communities or create content. Unlike traditional platforms where content is owned by corporations, here users have full control over their data and resources. This is one of the biggest “magnets” that attracts people to SocialFi, and it is hardly surprising if we look at what technology giants do with our data.
SocialFi runs on the blockchain, which means that all transactions, interactions and data storage are decentralized, transparent and secure. In this model, users can also manage their digital profiles and benefit from compensation systems in the form of tokens for their participation in the platform. Examples of such platforms are Steemit, Mirror.xyz or Farcaster.
What are the differences between traditional social media and SocialFi?
Traditional social media such as Facebook, X (formerly Twitter) and Instagram are based on centralized structures where all data is controlled by corporations. In such systems, users do not have access to their data, and the profits generated by the platforms are mainly derived from advertising based on collecting user data. In exchange for free access to the platform, users become a product – their data and behavior are sold to advertisers. We know perfectly well how it works for years, which is why SocialFi attracts tired users of traditional social media so much.
In the case of SocialFi, the key difference is decentralization. Thanks to the use of blockchain technology, users have full control over their data and can earn money from their interactions. For example, instead of giving away their data for free, they can sell it directly to interested parties for cryptocurrencies or tokens. Moreover, content published on SocialFi networks is not subject to central censorship – decisions regarding content moderation are made by the community, which prevents top-down restrictions on freedom of speech.
Challenges in SocialFi adoption (there are a lot of them)
Despite its promising prospects, SocialFi faces many challenges. First, decentralized social media are still in their early stages of development and their technological infrastructure needs improvement. The efficiency and scalability of the blockchains on which such platforms are based are not yet at a level that can compete with the big players in the social media market.
Another challenge is education and understanding by users of what decentralized technologies actually are. For many people, blockchain and cryptocurrencies still seem complicated and difficult to access, which may discourage them from using SocialFi platforms. The implementation of more intuitive user solutions and a greater number of educational campaigns may be key to wider adoption of this technology. It cannot be denied that decentralized social media are currently only a curiosity, although the number of users is constantly growing. In 2024, it was almost 2 million a day.
Top-down control, i.e. the example of Zuckerberg’s letter
The central control that characterizes traditional platforms has serious consequences. A perfect example is the controversy over content moderation on traditional social media, which was highlighted in a letter from Mark Zuckerberg of Meta (formerly Facebook) to the US government. In August 2024, Zuckerberg admitted that the government administration, including the White House, put pressure on his company to moderate content related to the COVID-19 pandemic and the US presidential elections. Although Meta initially bowed to this pressure, in the letter Zuckerberg admits that this was the wrong approach and expressed his willingness to resist in the future.
This event is a perfect example of how the centralization of social media can lead to content control and censorship. In decentralized social media such as SocialFi, such interventions are much more difficult to carry out, which allows for greater freedom of speech and transparency.
SocialFi, by combining social media with blockchain and DeFi technologies, could be the future where users have more control over their data and their engagement is rewarded. Despite technological and educational challenges, decentralization promises greater freedom of speech and transparency, both of which are missing in current centralized systems.
