SocialFi Re-democratizing Web3 with Social First, Finance Second

The world we live in has been extremely adaptive to the twists and turns coming its way – whether they be in fashion, business, economy, or the way we interact with one another. Social media, noticeably, has evolved over the last 30 years since the emergence of the internet, completely revolutionizing and defining social interactions; from Myspace, Meta’s Facebook, Instagram to now SocialFi projects like Ultra (UOS), Gritti, and Coinverse, where users are empowered with decentralized finance (DeFi) principles and unlimited opportunities. 

Social media platforms play an important role in our everyday lives. According to a recent Uswitch study, Americans spent more than an average 1,300 hours a year on social media, scrolling, liking, and commenting away. Technological advancements have paved the way for the unceasing transformation of the social media landscape through the years. Yet, what is recreational to some is a massive revenue source for a few centralized entities and their stakeholders. As the current social media platforms become more saturated and even destructive, users start to seek alternatives to uphold transparency, data privacy, and potentially even monetization. 

Enter SocialFi (social media decentralized finance) - enabling content creators to control and own their data, exercise freedom of speech, and monetize content, completely re-democratizing Web3 with social first, finance second principles. Or in other words, grow a community and get incentivized from your social media following and engagements. 

Here to re-democratize traditional Web2 social media giants, despite having no true definition in the market today, SocialFi continues to evolve with new iterations, especially in incoming-generating apps in the lifestyle, fitness, and gaming spaces.

Social Media today, and the problems it presents

While Web2, the current state of the internet, is centered on the acquisition of users to create their own content on the internet, many businesses have instead fallen to the needs of investors and focus more on monetization through advertisement. This has led social media platforms and audio-visual hosting services to use algorithms to centralize content and data – access to private info, biometric data, location, and network use. Simply put, consumers’ personal data becomes transactional following the infamous saying, “if the product is free, you are the product”. 

With greater internet activity, data harvesting grows. In recent years, users have become increasingly aware of the erosion of their personal privacy, to the point where some US states have been devising their own privacy legislation. California, Virginia, and Colorado are among the first to draw provisions from Europe’s General Data Protection Regulation (GDPR) to help protect data privacy, adding pressure to the US government so that this issue can be addressed at a national scale.  

However, with the rise of Web3, which uses a decentralized autonomous organization, features to provide and secure data are emphasized. Self-governance among users is practiced as there is no central authority on top of all platforms. This is enabled by blockchain-based technology that is digitally distributed and an immutable ledger, making it also cryptocurrency-enabled. By eliminating the middleman, this approach allows direct communication between brands and users, creating stronger and genuine connections, which ultimately leads to authentic communities, and in some cases, opportunity to monetize off your own content and engagement on online platforms. 

How SocialFi solves the challenges of web2 Social Media: understanding it’s building blocks

SocialFi bridges social media and finance through the use of Web3 – the internet and blockchain. Its increasing prominence is brought about by the way it prioritizes the creation of an autonomous space in social media while allowing users to earn income through tokenomics, ultimately allowing them to build and manage their own economies. Unlike in Web2, where revenues are managed by a central authority, SocialFi allows for a more equitable distribution. 

These social tokens are not just created at the application level, but can also be replicated at the user level, meaning that content creators can manage and own their own personal economies. As the following a user has on the social media platform grows, so too does the value of the token. Thus, there becomes more focus towards incentivizing greater genuine engagement, reducing spam and advertisement, and above all, allowing creators to monetize their personal branding. 

Aside from the ability of monetizing their own content, users and social media platforms expand to SocialFi for the sole reason of having a decentralized curation of content through the labeling of on-chain data. This means that for each post created by a user, rules engines quickly categorize these based on topic and keywords and then it is up to each individual to either engage or ignore, leaving out any central authority to decide what’s allowed within a certain network. 

SocialFi gives a greater sense of digital identity and ownership as users are given the privilege to enjoy more privacy, bypassing the large corporations who used to act as gatekeepers. User data is not at risk of being sold or leaked; giving users greater autonomy over their content. Moreover, because of the confidence in the guarantee of privacy, censorship is eventually eliminated and users have full control over their content – and even monetization.

Current stage of SocialFi, and its challenges

Joe Hung, Co-Founder and CMO at Gritti, a Web3 lifestyle social app, backed by top advisors from Web2 sports industry and the runner communities, highly believes in the future of SocialFi, though he asserts it should be ‘social first, finance second’ as the name suggests. The financial aspect may be an important player, but Web3 should not revolve around profits, but rather genuine connections. SocialFi gives brands, companies, and decentralized apps a way to interact and engage directly with users. On the other hand, in Web2, social media platforms are mostly beholden to their investors and advertisers.

According to Hung, social is an extremely broad term, and it would be extremely ambitious for a company to try and create a generic SocialFi platform. Hence, every platform’s operating principle should be to cater to a specific niche first. Gritti, for example, created a platform that incentivizes and motivates runners, by applying methods conducive to building healthy behaviors. Once users join their ecosystem, it is then Gritti’s job to keep them by creating an authentic decentralized community of runners, sharing fitness goals, and the motivators of a healthy lifestyle. Then, providing monetary incentives through tokens, they promote additional individual development; hence, applying the ‘social first, finance second’ mindset to make people want to come back for the community.

Other industry key players allow users to also keep track of their movements and steps, incentivizing fitness lifestyles and rewarding with app-specific tokens. The interaction among users shifts from individual competition to group activities where users earn these tokens by competing and completing tasks with each other, all centered in the creation of communities. 

Yet, one of the greatest challenges lies in providing incentives that allow the platform long-term growth and making it sustainable. As the SocialFi industry continues to expand, more will be required to avoid spiraling losses from potential harmful posts, which directly affect not just engagement levels, but also token valuations.

Future of SocialFi towards authentic community building 

The future ahead of SocialFi is solely defined by the sense of data ownership and strong community built by its users, in other words, content built by users with specific needs for users with the same needs. This sense of belonging allows SocialFi apps to build on resilience and sustainability and grow in the long-term. 

According to Hung, by bridging the gap between the physical and digital worlds, Gritti is looking to have the ability to completely transform how rewards are earned, how value is transmitted and created, and above all, how contribution can be perceived, especially on a community level.  

One of the biggest attractions of SocialFi lies in the ability to build authentic communities. Such is the case of Gritti, where the app designed ‘by runners, for runners’ centers on building a network which can be easily scalable through the merging of engagement and fitness lifestyle. Once a community is built through stronger engagement levels, the possibilities are endless - events, competitions - serve as a medium to migrate from web2 to web3 and bridge the gap between physical and digital. 

The realness and authenticity of SocialFi communities is an extremely attractive proposition from individual creators up to the largest corporations in the world. Horst Bente, member of Gritti’s advisory board and grandson of Adi Dassler who founded Adidas, is an avid supporter of sports and tech with multiple investments in the industry and its incubators. “With the rise of web3, NFTs, and SocialFi, we are going to see a lot of traditional sports companies using these assets, tools and business models,” says Bente. “These will help surround their established brands with communities that are loyal and engaged in a way that isn’t possible in the web2 world. The Dassler family is also exploring further opportunities in the web3 space in collaboration with Gritti”. 

Yet, the transition from web2 to web3 challenges users and brands to completely rethink the way they interact with each other, their approach, and their purpose. However, it allows businesses to attract users on a truly omnichannel level, merging physical, web2, and web3 and online worlds.

Prioritizing social before financial, sustaining incentives to award remarkable social performance, and safekeeping large amounts of data can present challenges. Nevertheless, no matter how rapidly the world is changing, technology has always proven that it is faster to respond than ever before, empowering users through powerful networks and redefining the concept of rewards.