SocialFi: A Post-Mortem of the Web3 Experiment That Failed to Disrupt Social Media

Since its inception, blockchain has evolved in very defined ways. For a technology that started with the goal of revolutionizing payments, the push into alternative areas seems overboard.

Blockchain technology has come a long way since its humble beginnings. Initially conceived as a revolutionary force in the world of payments, its potential has quickly expanded to encompass a vast array of alternative domains.

This evolution has seen innovators converge on a shared vision, giving rise to the Web3 SocialFi ecosystem. Platforms like Farcaster, Lens Protocol, and the now-defunct Friend.tech embody this collective aspiration. Their goal is to establish a communication system that places the user at the forefront and operates on a principle of mutual economic benefit.

SocialFi platforms empower their users to derive financial value from their time, data, and contributions to the platform. The advent of Ethereum has sparked a wave of enthusiasm among industry innovators, who now recognize blockchain's boundless potential.

Smart contracts have offered developers a blueprint for replicating any dominant Web2 application, a concept that gained momentum with Bluesky's emergence as an alternative to X.

At varying intervals, protocols like Farcaster, Lens, and Friend Tech have graced the scene. In addition to their unique incentive models, these protocols also ensure data security by employing a distributed network of nodes to power their platforms.

SocialFi applications are fundamentally opposed to the ethos of their big tech counterparts, such as Facebook, X, and Discord. While some creators may find favor on these platforms, big tech ultimately trades users' data for advertising revenue.

With billions of dollars in revenue generated, the average user is left unrewarded despite spending countless hours on these platforms. The promise of rectifying these anomalies has contributed to the massive adoption of platforms like Friend.tech over a year ago.

Launched on the Base Layer-2 scaling solution backed by Coinbase, Friend Tech became an instant hit in the Web3 world. At the height of its popularity, on September 14, 2023, Friend Tech was generating $2 million in daily fees.

Meanwhile, Farcaster, a well-funded Web3 social media site, failed to achieve a breakthrough in its UI/UX efforts. Despite once boasting 104,000 Daily Active Users (DAUs) in July.

Far from attaining the heights scaled by their Web2 counterparts over decades of consistent building, top social platforms in the broader tech world have encountered a slowdown.

Many SocialFi protocols could barely sustain one year of optimal operation. Friend Tech, once a shining star, has now become a cautionary tale of over-projection. From a peak of $2 million per day, the application now struggles to generate $71.

This lack of promise has prompted the developers of Friend Tech to recently revoke the protocol's smart contract. In the world of traditional finance, this action would be akin to declaring bankruptcy.

Although only Friend Tech has closed shop for now, Farcaster has also experienced a sharp decline, with just 142 DAU now visiting the platform. Despite constant usage by Ethereum co-founder Vitalik Buterin, Farcaster has been unable to compete with Web2 alternatives like X and Facebook.

Lens Protocol has not escaped the general market downturn either, recording a steep slump from a high user count of 42,281 in July to just 8,368. The current outlook for these protocols highlights a vast disparity between adoption and sustainability.

In addition to the dwindling platform usage, these platforms' tokens have also performed poorly, especially when contrasted with the emerging class of memecoins, assets that offer a higher promise of instant gains.

Many innovators agree on the need for new platforms powered by Web3 and Artificial Intelligence (AI). While crypto pioneers are making significant strides in introducing unique solutions, they must also master the business aspect of their inventions.

A protocol cannot rely solely on blockchain's core benefits to penetrate the mass market. There must be a dedicated focus on Research & Development, marketing, and a well-defined roadmap to prevent unrealistic expectations.

Beating big tech giants is a herculean task that will not be accomplished overnight. Web3 innovators in social networking and artificial intelligence, such as ASI Alliance, DePIN, and others, must study their respective Web2 competitors to learn from their experiences. This knowledge may prove invaluable in their quest to penetrate and ultimately displace big tech on a grand scale.