GM HEARTLAND |
Hey Google, play XO RUG Llif3. |
—El Prof, Muhammed & Chad |
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We’ve spilled plenty of binary code before about one of our favorite web3 buzzwords. (And will continue to do so, for those who read to the end.) I’m talking about Social-Fi, the utopian promise of a more equitable, less brain-wormy version of social media built on the blockchain.
But it being web3 and all, the promise of a much better future carries with it a much bigger risk of being, well, an absolute goddamn scam.
This week, Friend.Tech, one of the biggest players in the Social-Fi space, pulled the proverbial rug. Or so, at least, X thinks. Indeed, whatever terminology you prefer, facts are facts. The project’s founding team dumped its smart contracts onto Ethereum’s null address on September 8, after selling some $52 million in related $ETH earnings over the past six months.
A rug pull? From a Social-Fi platform? Say it ain’t so! 😱
Those of you who regularly touch grass might not get the joke. It’s not exactly an unexpected development. Most of the attempts to monetize individuals’ social graphs have looked like complicated Ponzi schemes, with the winners being the creators of the platforms themselves, rather than the users adopting them. Friend.Tech is no exception. In fact, the founders of this very project have a history of “social experiments” that can be loosely described as value extraction schemes using network effects on social media.
But first, let’s recap the Friend.Tech experience. Naturally, it’s as un-user-friendly as your average web3 platform — go to the website, connect your wallet, connect your X account, etc. (A data scraping play? Almost definitely!) Finally, once you’ve got your profile setup, you get to the good stuff: buying and selling creators’ “keys”.
Keys, you say? What do they unlock?
The ability to engage with the normal functions of a social media app!
On Friend.Tech, keys basically allow users to DM other users. Influencers, specifically; with the added “value” being that they might actually respond to you, since you’re paying out the ass for the privilege. Plus, there’s the specter of a rumor that it would (could) soon (someday) probably (possibly) entitle you to (a portion of) their future earnings, and/or the right to post whatever you want on their channel. (But obviously not.)
For those who were early to the platform — more specifically, creators/influencers with particularly popular keys — it was the best of times for flipping creator-specific community tokens. But like many of its web3 forebears, Friend.Tech’s initial new luster gave way to the actual platform’s rusty old reality: OnlyFans, with gas fees.
I’ll admit, it did make me nostalgic to witness the web3 community leaning into game theory terminology and expected payoff metrics that I haven’t seen since the great OHM ponzi of last cycle. Ah, the utopian idea that people would agree to invest in one another, and diamond-hand those investments to boot.
But jeeters jeet (read: sell). Friend.Tech employed a quadratic formula for its pricing mechanism, so mass onboarding of new users mainly served to send the price of a lucky few creators to the moon. Then, per usual, the flip side of quadratic-formula-based pricing took hold: when supply outpaces demand, the price comes crashing back down to earth, and through the floor.
Which brings us full circle. The gains were pocketed. The platform was shut down. The rug was, as they say, pulled.
Luckily, for loyalists, there are alternatives out there, the most relevant of which is AVAX’s Stars Arena. It’s early user base? OnlyFans talent! This will surely end well.
If we’ve learned anything from the last few weeks, you want to be the creator of a Social-Fi platform, but not the user of one. Friend.Tech snagged more than $50M. Pump.Fun netted twice that. And most of us were left with nothing but a useful reminder:
Beyond the lovely web3 buzzwords, for many teams, the user is still the product. And the goal is still dollars, not adoption.
—El Prof
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Friend.Tech is dead. That doesn’t mean Social-Fi is.
Real-life events can make cynics of us all, but the promise of a revolution in how communities interact, manage resources, and make financial decisions holds strong. A better-defined structure for blockchain-based communities than, say, Telegram could still flourish in the long-run, enabling communities to establish decentralized financial (DeFi) systems, fostering greater collaboration, transparency, and shared prosperity.
But given the unfortunate parallels between bad actors in the burgeoning sector and their traditional predecessors, it’s time to wonder if the future of Social-Fi isn’t on web3, but web2.
In fact, several leading web2 social media companies are already exploring the potential of Social-Fi. With their established user bases and communities, these platforms may be better-positioned to integrate DeFi mechanisms than challenger brands.
With that in mind, here’s a quick rundown of what a pivot to Social-Fi might bring to the table for some of the leading web2 social media platforms:
X: Elon Musk’s acquisition was just the beginning of the degen-ification of X, née Twitter. The platform has repeatedly teased integrating crypto payments, while experimenting with features like Super Follows, which allow creators to earn direct revenue from their followers. It’s not hard to see how the de facto gathering place for the crypto community could benefit from going full Social-Fi. But that’s assuming its Chief Twit is still a competent business leader — and not a walking mid-life crisis more focused on making gross passes at pop stars.
Reddit: Reddit kickstarted the TradFi retail investing revolution. Can it do the same for DeFi? The company’s community-driven forums have already introduced Community Points, a system of rewards for participation. Building on this, Reddit could explore the creation of decentralized treasuries controlled by subreddit communities, allowing more transparent and democratic funding of projects. Then again, the company recently (and controversially) went public, and it’s hard to imagine shareholders signing off on full-blown crypto integration.
Discord: With its strong focus on community-building — and significant crypto-friendly user-base — Discord is a natural fit for Social-Fi. Decentralized, community-governed financial systems could be implemented within Discord servers, enabling members to contribute to and benefit from shared resources. It also doesn’t share the same leadership concerns as X or Reddit. Then again, it doesn’t have the full breadth of their cultural reach, either.
Mastodon: In theory, Mastodon is the platonic ideal of a Social-Fi leader. As a decentralized social network, Mastodon’s infrastructure aligns well with the principles of Social-Fi. By integrating decentralized finance, Mastodon could foster community-driven financial dynamics and empower users to participate in governance decisions. But its usership is even less established than Discord, and ultimately, I’m not sure it would have much of an advantage over a challenger brand starting from scratch.
Each of these players have different strengths and weaknesses in terms of a potential pivot to Social-Fi. But they do all share one thing: incentive.
A study by CoinMarketCap found that the total value locked in DeFi protocols exceeded $100 billion in 2023. A separate survey from CoinDesk revealed that 70% of social media users are interested in learning more about decentralized finance. Finally, number of active users on decentralized social media platforms surged by 40% in 2023, according to a report by DappRadar.
In other words, there’s money, demand, and eyeballs waiting to be grabbed. The web2 lizard-people-in-chief had best hurry up before playhaus gets to them first.
—Muhammed
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