On October 5, market news said that Web2 social media platform
However, at the same time, as a representative of Web3 social media, the SocialFi track is once again facing huge challenges. Farcaster, a track unicorn that once had high hopes, has seen sluggish growth. Since mid-August, it has only added about 30,000 new users. Its protocol revenue has gradually slowed down since July, with total revenue of about US$2.33 million. Another former star project, friend.tech, despite successfully generating $81.953 million in protocol revenue (of which the team received approximately $45 million in fees), subsequently chose an almost "Soft Rug" strategy and gave up on smart contracts. control.
Although well-known venture capital institutions such as a16z and Paradigm still have confidence in the SocialFi track, the development of the industry cannot help but make people wonder: Is encrypted social still a track worth looking forward to? Where will the future of SocialFi go? Are there fundamental problems with the crypto-social project?
In this article, we’ll take a deep dive into the challenges facing the SocialFi track.
Challenge 1: Fierce competition with traditional social media
According to Metcalfe's law, the value of a network is proportional to the square of the number of users. Traditional social media such as Facebook, Instagram, WeChat, etc., have become the "traffic entrance" and "social network carrier" in the Internet ecosystem with their long-term accumulation of huge user base. However, SocialFi's products chose to directly confront these mature platforms in an attempt to "subvert" these giants, but did not provide obvious advantages in terms of user needs, platform migration costs, and decentralized rights. This strategy of ignoring the real needs of users makes it difficult to fundamentally shake the status of traditional social platforms.
Challenge 2: Lack of clear differentiated value
Successful innovative products can often find a "Trojan horse" to enter the market, that is, a core value that can break the existing pattern. However, current SocialFi products have not found strong enough alternative value. For example, attracting users through economic rewards such as token airdrops will ultimately only lead to a continuous decline in token prices and fall into "chronic suicide after the data bubble." If it cannot provide truly attractive core application scenarios, it will be difficult for SocialFi to achieve large-scale breakthroughs.
Challenge 3: Excessive focus on financial rewards and neglect of social nature
The essence of social networking is to promote interpersonal interaction, rather than purely financial rewards. When a platform turns social behavior into a means of economic incentives, users' motivations are no longer pure and unsustainable in the long run. Therefore, if the SocialFi platform cannot provide users with a strong social driving force, it may eventually become another financial game, and the social nature will become in name only.
Challenge 4: Failure to establish a closed loop of value and becoming a “toy” of capital
Currently, the value of most SocialFi products relies on venture capital investment and lacks a complete closed-loop value system. The ultimate goal of the inflow of funds and attention is only economic returns, but cannot form a long-term value exchange mechanism. This makes the value of social networks gradually exhausted, and ultimately it is difficult to support the sustainable development of the platform.
Challenge 5: Business model dilemma
Currently, the business model of SocialFi products mainly relies on fee income, but this model is difficult to cope with the challenges of tight market liquidity and declining active users. If it cannot find a market segment suitable for its own development or provide more attractive core functions, SocialFi products will be difficult to achieve large-scale growth and breakthroughs.
Conclusion: SocialFi’s future challenges and opportunities
In general, the challenges SocialFi currently faces come from factors such as unclear market positioning, lack of strong differentiated value, and over-reliance on economic incentives. To stand out in the highly competitive social arena, SocialFi must rethink its core values and user needs, and find a practical business model to establish a long-term value closed loop.
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