In the expanding universe of decentralised finance, Social Finance (SocialFi) has emerged as a powerful connector between social media and decentralised finance, bridging the gap between creators, the masses and Web3.
I will discuss SocialFi and its benefits and challenges in this introductory article. More importantly, watch out for the section on why it relates to the cross-border payment industry.
Democratising finance and decentralisation
SocialFi enables creators to monetise their influence while making blockchain usage “friendly” for the masses.
Platforms like FriendTech and StarsArena allow followers to purchase keys/tickets to creators that they are following. The key/ticket price goes up with every purchase and goes down with every sale.
By letting creators tokenise their clout and engage in DeFi, these platforms ensure a direct monetisation channel that wasn’t as accessible in traditional social media setups. For example, tipping and buying “keys” grants holders access to a private channel with private content.
Beyond the creator economy, SocialFi introduces the everyday social media user to the vast world of blockchain and cryptocurrencies. These platforms allow users to support creators by first learning about setting up a blockchain wallet and sending and receiving tokens to buy tickets/keys. They inadvertently become adept at using blockchain technologies, eventually entrenched, fostering a gradual onboarding of the traditional onto decentralised networks and systems.
Let’s dive deeper into what SocialFi means for creators and followers.
A new era for creators
For creators, SocialFi platforms can help them:
Monetise influence - Creators have keys/tickets, which followers can buy, hold or trade. Currently, FriendTech and StarsArena are the 2 biggest SocialFi platforms, and it stands to reason that savvy creators should start there.
Stay in control - Creators have ownership and control over their content, minimising reliance on traditional platform algorithms. Creators can also buy their own tickets, earning or losing, depending on the value of keys/tickets.
Build a mutually beneficial community - Creators and fans benefit from the community’s growth via a new financial and social ecosystem. As followers buy tickets/keys, they will directly benefit from the creator’s value.
Love social media but never interested in blockchain, DeFi et al.?
Never mind that - with functionalities that are embedded in social experiences, SocialFi platforms introduce the masses to the world of blockchain through:
Seamless interaction - Integrating DeFi operations into familiar social media interactions lowers the learning curve for new users. No starting capital is needed, so users can use it as long as they have an X (Twitter) account and start earning trading fees from people buying their keys/tickets.
Decentralised participation - Offering opportunities to participate in decentralised governance and finance, making blockchain usage a norm rather than an exception.
Educational gateway - Enabling learning through doing. It makes understanding blockchain and decentralised finance intuitive and contextual.
SocialFi presents the same unique challenges commonly associated with DeFi, such as regulatory compliance and security and the constant need to manage rapid technological advancement and adoption. However, the potential for SocialFi to reshape the creator economy and to onboard millions of users into blockchain usage is significant, marking an essential milestone towards decentralised ecosystems becoming mainstream.
This brings me to the next section.
SocialFi and cross-border payments
There is massive potential for meaningful cross-collaboration in this space. SocialFi represents a new financial ecosystem ripe for picking by cross-border payment solutions to innovate, such as promoting and stabilising blockchain use to open up new corridors. Meanwhile, SocialFi will benefit immensely from the reach of cross-border payment networks, making it easier for creators and followers to establish a next-gen financial network.
Surely there is a space - and I'd argue for SocialFi - to onboard a USD 190 trillion cross-border payment market that is growing at a steady rate annually. Use cases already exist - your typical social media user spends at least 2 hours on these platforms - I'd say let's drive them further down the blockchain funnel.
SocialFi has the power not only to rethink the entire creator economy but also to be the gateway to the huge cross-border payment market that desperately needs more innovation.
The question isn’t “Why another social app when X, Instagram and TikTok exist?”. The question should be, “Where will creators prefer to create?” The answer, I suspect, is where the platform is open and decentralised with an easy-to-use wallet to reward followers/holders and themselves.
The cross-border payment industry may need to keep an eye on SocialFi and its development.
I know I would.