Vikara September 2024 Update – Tides Have Officially Turned

The Federal Trade Commission (FTC) released a report this month titled A Look Behind the Screens: Examining the Data Practices of Social Media and Video Streaming Services. The FTC’s conclusion was scathing:

“The amount of data collected by large tech companies is simply staggering. They track what we read, what websites we visit, whether we are married and have children, our educational level and income bracket, our location, our purchasing habits, our personal interests, and in some cases even our health conditions and religious faith. They track what we do on and off their platforms, often combining their own information with enormous data sets purchased through the largely unregulated consumer data market.”

The report prompted us to revisit SocialFi, or decentralized social media, promising users’ greater control over their data, privacy and monetization opportunities. 

SocialFi, short for Social Finance, is a Web3 approach to social media, combining social networks and DeFi. The key tenet is to provide network users with control over their own content (ie freedom of speech) and data given no centralization body owns and runs the underlying network. Further, SocialFi aims to provide earning opportunities from creators’ engagement and following, hence the DeFi aspect.

While SocialFi seems like a natural fit for crypto and Web3, it has yet to catch on en masse. This is no surprise given the first mover and network effects of X, Facebook, Instagram, etc. Once you are there and you’ve got your “contacts/friends” or social network, it’s a big ask to jump ship and start over again, unless there is a compelling reason to do so. And while there have been a few platforms that gained traction, at least for a period of time, namely Friend.tech, none have shown the ability to compete with the Web2 incumbents.

Below we highlight a handful of SocialFi companies, with many more being incubated privately given large amounts of VC funding that has been invested in the space.

Decentralized Social or DeSo (DESO) 

DeSo is the first purpose-built layer-1 blockchain created to decentralize social media and scale storage-heavy apps for mass adoption. Creators’ content is stored directly on the DeSo blockchain with infinite-state applications generating new data (users’ messages, likes and follows, social tipping, etc) with every transaction that must be stored and indexed. Founded in January 2019, it is backed by Sequoia, Social Capital, Andreessen Horowitz and Coinbase. 

DeSo also has their own SocialFi apps such as Diamond, which is the equivalent of a Web3 X where creators and communities can engage and earn.

Recently, Focus, a new social network that combines crypto speculation and social media (which seems like a spin on Friend.tech) announced they were building on DeSo. Focus plans to have a look and feel of X but with anonymous crypto-enabled monetization mechanics that include paid reposts (aka decentralized ads), paid messages, paid unlockable content, subscriptions, and a feature called Creator Coins that lets one invest directly in other creators’ revenue streams.

Farcaster (Private)

Farcaster is a social media protocol dubbed the (Twitter (now X) alternative) built on L2 Optimism. Devs can build integrated apps that perform various social media functions. One such app is Warpcast, a Twitter-like platform for writing posts (called “casts”), following other users, and liking or sharing (“recasting”) those users’ posts.

The platform uses a paid model to avoid bots, a major problem on platforms like X. Users have to pay a $5 sign-up fee, which is meant to dissuade users from creating spam accounts. The fee also restricts the number of casts (think tweets) that a user can share attached to paid-for storage units. By paying the sign-up fee, which is valid for up to a year, a user will be limited to 5,000 casts, 2,500 post attachments, and 2,500 reactions in a year.

The protocol was founded in 2020 by Dan Romero and Varun Srinivasan, former Coinbase employees. They recently raised $150 million, led by Paradigm, with participation from a16z crypto, Haun, and USV, amongst others at a valuation of $1 billion, it’s the largest investment in SocialFi media to date. Investors claim that Farcaster could be the SocialFi base layer that developers utilize to build new social media applications if and when SocialFi takes off. 

Nostr (Use BTC as networks currency)

Nostr is a decentralized communication protocol that stands for “notes and other stuff transmitted by relays.” Nostr relies on a network of users, is open-source, and gains value from its censorship-resistant nature to address issues like spam, proprietary algorithms, and censorship. While it does not have its own token, Bitcoin acts as the network’s native currency.

Apps built on Nostr include: 

• Blogstack – a blogging website
• NostrChat – chat application similar to WhatsApp or Telegram
• Alby – web-extension that integrates your bitcoin and Nostr wallets
• Zap.stream – live streaming service that allows content creators to earn bitcoin while streaming.

While Nostr seems to have some traction, it is mostly amongst the Bitcoin maxis and “geeky” community, as they have said themselves. 

Geojam (JAM)

Geojam is a social network that “upgrades” the interaction between fans and artists whereby they provide additional earning opportunities for creators (musicians, artists, etc.) while providing users unique experience for influencers, artists, and fans.

Users earn the JAM token by interacting with creators and engaging with the app. They can then redeem the tokens for exclusive artist merchandise, events, or as their marketing materials claim, interactions with the artists.

The project has been funded by high profile musicians Mariah Carey, Tyga and Machine Gun Kelly, for example. And while receiving a relatively large amount of media coverage and hype, it has largely failed to perform, with its user base small and its token price down >99% from it’s March 2022 launch price. 

Halo Social (Private)

Start-up Halo Social allows users to track their DeFi portfolios, manage digital assets, and engage in a “Social to Earn” model. The model incentivizes users to participate in the platform by rewarding them for their social interactions and data contributions. The platform also utilizes AI to analyze and monetize social data, providing users with a share of the revenue generated from their data. This approach empowers users to take control of their digital footprint while creating a potential income stream through their social activities.

Friend.tech (FRIEND)

Last but not least is Friend.tech. Friend.tech is a decentralized social network where users can buy and sell “keys” that are linked to Twitter (now X) accounts. These keys offer access to private in-app chatrooms and exclusive content from that X user akin to ones found on platforms like Telegram. They can later choose to sell those keys if they decide to leave the chat. The platform markets itself as “the marketplace for your friends.” 

Launched in August 2023, it got off to a raging start with top influencers earning significant sums of money from their content in its first two weeks post launch (Chart 26).