The convergence of decentralized finance (DeFi) and social media, giving rise to SocialFi, once ignited immense excitement. The promise of empowering users to monetize content, control their data, and actively participate in governance seemed revolutionary. This fusion of blockchain and social experiences was poised to disrupt the status quo, mirroring the impact of platforms like WeChat and TikTok in the APAC region. Just as ZEPETO and Roblox captivated younger audiences with immersive digital worlds, SocialFi aimed to reshape online interaction, transactions, and value creation.
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However, despite its potential, the initial fervor surrounding SocialFi has subsided. Diminished user engagement, waning interest, and unsustainable project models have taken their toll. Projects once hailed as transformative have witnessed a significant decline in activity and user participation. Understanding the reasons behind this downturn is crucial, not to assign blame, but to identify opportunities for revitalization. This analysis will delve into the rise and fall of key SocialFi platforms, examining their lifecycles to extract trends and challenges that businesses must address to move forward.
socialfi hiện tạiSocialFi platform lifecycles. Source: Tiger Research
Lessons from the Frontlines of SocialFi
The Collapse: Relinquishing Control
Friend.tech launched with high expectations, rapidly gaining traction through airdrops and its V2 update. Users were drawn to its unique model of tokenizing social interactions, creating a marketplace for trading social clout and engagement. Early adopters flocked to the platform, driving robust activity and token speculation.
Friend.tech experienced a complete collapse. Source: @cryptokoryo Dune Dashboard
However, this initial success proved fleeting. Following the V2 release, the Friend.tech team relinquished control of the smart contract on September 8th, transferring it to a null Ethereum address. This decision effectively halted any possibility of future updates or feature implementations.
Official announcement from Friend.tech on Twitter. Source: @friendtech Twitter
While the platform remained operational, the lack of new features led to a decline in user engagement and innovation. This stagnation impacted user loyalty, prompting many early adopters to abandon the platform as continuous updates ceased.
phí friendtech giảm mạnhThe sharp decline in fees from Friend.tech. Source: Defillama
As the platform stagnated, the FRIEND token lost its utility, becoming another memecoin within the SocialFi ecosystem. By September 2024, Friend.tech’s revenue plummeted, dropping from over $2 million in fees on September 14, 2023, to a mere $71 a year later. Devoid of a practical use case, the FRIEND token’s value plummeted, marking the effective end of Friend.tech in the market.
Stagnation: The Decline of SocialFi Platforms
Despite early promise, SocialFi has faced significant challenges in sustaining long-term growth. Like other fleeting trends in the blockchain space, many SocialFi platforms struggled after the initial hype subsided. Lens Protocol, prominent during the 2024 boom, serves as a prime example.
Lens Protocol witnessed a surge in account registrations, fueled by FOMO and initial excitement surrounding its decentralized social networking features. The influx of new users creating accounts was initially impressive.
Lens Protocol followed a similar trajectory to Farcaster. Source: @filarm Dune Dashboard
However, as the novelty wore off, growth slowed dramatically. In recent months, only 142 new accounts were created, a stark contrast to its earlier vibrant activity. Another indicator of Lens Protocol’s decline is the significant drop in the price of Lens accounts. At its peak, a Lens account could fetch over $200, reflecting high demand and excitement. Currently, these accounts are valued at less than $1, indicating a sharp decline in both user interest and perceived platform value.
The value of Lens accounts also plummeted. Source: NFT Price Floor
Maturity: Too Fast, Too Soon
Farcaster, along with its Warpcast app, initially garnered significant attention, raising over $150 million in May 2024. The initial FOMO wave drove a substantial increase in daily active users, and the platform seemed poised for success.
người dùng mới farcasterSource: @filarm Dune Dashboard
From a daily peak of over 15,000 users in early February, new user registrations have dwindled to less than 500. While Farcaster consistently updated its infrastructure and touted its decentralization potential, it struggled to expand its user base. This reflects a major hurdle in SocialFi—retaining users beyond the initial hype. New user registrations plummeted from over 15,000 in February to a mere 545 in September.
người dùng farcasterFarcaster’s daily active users are trending positively. Source: The Block
While daily active users remained relatively stable, engagement dropped by 60% from its peak, primarily due to a lack of compelling content. As a social platform, Farcaster struggled to provide enough content to sustain long-term user interest.
Pivoting: Embracing New Business Models
Faced with declining user engagement and waning relevance, some SocialFi platforms attempted to pivot to new business models, hoping to regain momentum. CyberConnect, recently rebranded as Cyber, shifted its focus to Layer 2 blockchain solutions.
Source: Defillama
While this pivot seemed strategically sound, it failed to generate the anticipated user interest. The platform’s Total Value Locked (TVL) plummeted to a mere $35,000, significantly lower than its previous peak.
The Future of SocialFi
The rise and fall of platforms like Friend.tech have exposed critical vulnerabilities within the SocialFi sector. While initial excitement and FOMO can drive early adoption, long-term success requires more than just speculation. Meaningful and engaging experiences are essential for sustained user interest. Unfortunately, many projects have failed to deliver on their promises, leading to disillusionment and a sharp decline in user engagement.
SocialFi projects face several core challenges that have hindered their growth, including: 1) Lack of long-term user engagement, 2) Overreliance on decentralization, and 3) Lack of content and innovation.
Several issues further compound these challenges:
- Crypto Wallet Inconvenience: Using wallets adds extra steps, increasing service complexity and often involving confusing terminology.
- Lack of Competitive Differentiation: Many decentralized social media platforms resemble Web2 counterparts, offering no significant advantages.
- Absence of Native Influencers: Platforms like TikTok and Instagram thrived due to the emergence of native influencers. Decentralized platforms have yet to cultivate such figures, limiting their organic growth potential.
The key takeaway from SocialFi’s struggles is clear: simply replicating Web2 models on the blockchain is insufficient. Success in this space requires platforms to offer truly novel experiences and deliver tangible value to users. Only through continuous innovation and adaptation can SocialFi platforms achieve sustainable long-term growth.
