Can SoFi – Social Media DeFi

It’s becoming more and more evident that the social media model is broken. Successive scandals continue to underline that social media platforms put shareholder profits and advertiser interests above consumer protection and security. You do this in banking you’re threatened with a jail sentence, or at minimum a whopping fine and censure from the regulator.

Decentralized social media is in the limelight, but what needs to happen for it to gain the necessary momentum to compete with the size and scale of the centralized social behemoths? 

In the shadows of DeFi’s meteoric rise, several stories with the common thread of decentralized social media have crept in. On November 8, FTX CEO Sam Bankman-Fried addressed an audience at the Breakpoint event in Lisbon. He spoke of his belief that there’s vast unrealized potential in decentralized social media. He pointed to the capacity to “supercharge” DeFi by combining a great product with an established massive global user base. 

A few days later, the co-founder of Reddit and head of VC fund Seven Seven Six, Alexis Ohanian announced a partnership with the Solana Foundation. Jointly, the partnership will pledge $100 million to nurture a decentralized social media project on the Solana platform. 

Twitter’s Decentralization Goals

Around the same time, even more seismic news emerged that Twitter is launching an internal team dedicated to cryptocurrency as part of its drive to become a decentralized platform. Separately, Twitter has provided funding to an independent initiative called Bluesky, dedicated to creating standards for decentralized social networks. Now, the new Twitter team will work alongside the Bluesky team in a joint research effort. 

Of course there is Facebook’s, with its recent travails and the renaming of its parent company to Meta. The firm has confirmed that the change is reflective of its focus to develop a digital metaverse. Based on previous Facebook news, one might assume that it would develop an economy based around the problematic Diem currency. The company has also previously confirmed that it’s looking into NFTs.  

If we consider the metaverse as a natural evolution of our time spent online, it’s inevitable that social media will play an instrumental part in the infrastructure. The big question is will the winners be centralized or decentralized? 

David versus Goliath? 

It is evident that the established social media companies have a Goliath-sized edge on new entrants when it comes to user numbers. The same will have been said about banking before challenger banks, bitcoin, and DeFi arrived, where big fintechs are overtaking banking and the rise the £2 trillion cryptocurrency market has been created by the people, without the traditional financial system and governments – all of this in the last decade.

Facebook and Twitter have vast, ready-made audiences, on which to test new features and integrations, however, user sentiment isn’t necessarily on their side. It’s become apparent recently that Facebook in particular, is struggling to attract younger users.

Moreover, decentralized platforms have an edge that could prove to be a killer – financial incentives. Blockchain’s peer-to-peer payments, combined with DeFi and gamification, offer endless opportunities for users to generate income for their content while also earning for other activities like watching ads. Could this be the incentive that attracts people away from traditional social media platforms? 

I am a fan. Years ago, in the great debate over the utility token prior to the Howie test, my narrative to regulators to explain tokens, was a fictitious Facebook coin where the consumer participates in the economic value of the network with “a product” (versus a security) that is purchased in lieu of the token, using their personal data to earn them (advertising) network revenue and creating the value. 

In this illustrative example, the many billion dollar valuation and dividends of the company would be distributed and shared amongst its billions of users and not just a small number of shareholders who may have misaligned incentives or seek to exploit the data of billions of people, often with unintended negative consequences.

Social Media Times DeFi

It’s early days for Web 3.0 but there are a few projects that are innovating at the convergence of social media, decentralization, and digital assets.

Subsocial is built using the Substrate framework, allowing it to tap into the Polkadot and Kusama ecosystem of blockchains. It allows anyone to permissionlessly create their own social network so that users can send and receive tips or recurring payments for content, rent, or sell posts as NFTs, introducing the concept of monetizing memes, deploying social tokens for communities, and much more. Compared to centralized platforms, it’s completely censorship-resistant, so nobody can ban an account or sell other’s personal data. 

The Polkadot ecosystem’s interoperability is what makes Subsocial stand out as a blockchain social media platform, along with its customization potential. Once up and running, the platform will integrate with other applications running on the network, allowing more monetization opportunities than competitor platforms. 

Alex Siman, CEO of SubSocial, explains how he believes this will launch new economic paradigms based on social media, “We call it Social Finance – social networking combined with decentralized finance. A social networking platform on the blockchain is totally transparent, meaning you can see the account balances of everyone you interact with.”

Siman believes people won’t be put off by the idea that everyone can see their account balances, drawing parallels with established social platforms, “At first, people might take issue with the transparency feature, but think back to when social networks first launched, and people didn’t want to post pictures of their homes or their kids, which they now do regularly. I think that once people experience the vast benefits of SoFi, such as the microtipping economy, and creators capturing the full value of their work, sentiment will change.”

Due to it being based on the blockchain, it’s also possible to decouple their website front-end from the underlying SubSocial infrastructure, allowing far more opportunities for developers to customize their own apps and websites while tapping into the platform’s engine. 

Permanent Uncensorable Content 

Another standout project is Creaton, based on the Polygon platform. Creaton is a rival to platforms such as Patreon or OnlyFans, which allow creators to distribute paid content but both charge heavy fees and have come under fire for random account closures and opaque policies. In contrast, Creaton is a decentralized platform allowing creators to reach their audiences but with low fees and assurance of censorship resistance. 

Creaton works by providing each creator with a non-fungible token (NFT) contract and mints all their content as NFTs. As the NFT itself cannot necessarily hold all the data in the content, which may be memory-heavy images or even videos, Creaton works with Arweave, which provides a “permaweb” of uncensorable, permanently available content. 

Alex Kus, founder of Creaton, makes a compelling argument for a censorship-resistant Web 3.0, “Online censorship by platforms like TikTok shows that jurisdictional restrictions from one country can extend across the centralized Web 2.0. In a universe that’s becoming increasingly meta, it only makes sense for all creators to fully own their content through NFTs.”

Based on Creaton’s model, the user is assured that their content is online forever, and thanks to blockchain-based smart contracts, they’ll keep getting paid under the terms of its distribution. Kus believes this creates healthy competition between content platforms.

“Web3 will enable creators to go where they are treated best, allowing them to switch platforms with ease, thanks to the decentralized and interoperable nature of blockchain-based applications,” add Kus.

At this point in the evolution of Web 2.0 and social media, it would be difficult to find many people who would argue that the current social media model is sustainable. The big question is whether the vast global user base of existing users can be persuaded away from their established accounts in favor of a different way of interacting online.

Financial incentives, ownership of your personal data, and control over your content in the Web 3.0 metaverse makes a compelling SoFi proposition and a darn good start. If all of this is free and its easy to access a fulfilling experience, it is a killer app.