Solving SocFi Strife
By Moni Talks Chairman and Founder Brendan Beeken FInstSMM
We’ve had DeFi, we’ve had GameFi, now SocFi is all the craze.
A blend of social media and finance, also known as SocialFi, it shares some characteristics with its similarly named contemporaries. In essence, it is a movement towards the decentralisation of social media through the use of blockchain tech, giving users more control over their data and the potential to monetise their activity.
It makes a lot of sense and is a concept Moni Talks is embracing. When we roll out our social platform, the focus will be on the community and an open forum for users that encourages and rewards positive engagement. It won’t just be another platform for copy trading and influencers who want to get rich giving shoutouts for any old project.
We all know that social media plays a major role in shifting crypto markets, so it’s little surprise the SocFi is trending. However, there are dangers, and we need to be aware of them.
SocFi Security
As with any digital platform, especially those dealing with personal data and finances, SocFi presents concerns.
For example, private data security. While blockchain tech delivers security through encryption, if it is not deployed correctly, personal information, including sensitive and financial details, can be vulnerable to attack. Any SocFi platforms which plump for centralised control are likely to store user data, making it ripe for hacking or misuse.
SocFi Misinformation
A further concern is FOMO on steroids. By linking social media with finance so directly, users are at a greater risk of making impulsive investment decisions without conducting the necessary research. Crypto enthusiasts have become wise to social media hype being used to attract money to projects that may not work out, especially pump and dump schemes, and have learned to check out the project themselves before putting in any money.
If the promotion (hype) and investment button are too close, some users may skip the vital research due to fear of missing out on an opportunity.
Expanding on that point, we all know that social media platforms can be echo chambers, where we are only exposed to opinions similar to our own. This is by design, as we choose who to follow and usually opt for those who reflect our own outlook.
When we mistakenly see this limited range of opinions as a ‘world view’, we are more likely to be misinformed, sparking concerns about misinformed financial decisions. Essentially, proper research is abandoned because we’ve heard plenty of views, forgetting they are from an echo chamber. It means we become overly reliant on the views of influencers (sometimes, if not often, financially incentivised hype) rather than independent experts.
SocFi and Regulation
DeFi has been around for a while, and regulators are only just starting to get to grips with it. We are only just beginning to see serious efforts to protect consumers while allowing responsible decentralised financial projects grow.
SocFi is still a new area and, inevitably, it is going to expand faster and wider than regulators can understand it. As we have seen with certain crypto exchanges established during the ‘wild west’ days, when regulation comes it can undermine and even end some of the biggest names, putting project investors and users at risk.
So much work has been done to try and clean up the crypto space, and without either enforceable regulation or responsible platform management, SocFi could become the new playground for scams and fraudsters.
SocFi Tokens
It is common in SocialFi for platforms to have a native token to reward users. This is something Moni Talks will deploy, rewarding engagement with a utility token which has tangible value and use.
However, some SocFi platforms run a native token with no utility, making it difficult to ascertain its true value. This leads to volatility, risk to investors, and undermines the purpose of a reward system and token deployment.
There is also a risk that reliance on token economics will dilute the purpose of the platform, moving it away from a place for genuine social interactions to a space focused purely on financial gain.
SocFi Centralisation
While the promise of SocialFi is decentralisation, following the models seen in broader finance and gaming, there is a risk that SocFi will become centralised if a handful of influential figures begin to dominate.
This will see some of the issues we have seen with traditional social media – such as bias, censorship, and loss of net neutrality – plaguing this emerging sector and undermining its purpose.
SocFi Concerns IRL
These concerns are not simply speculative. There have been numerous reports of problems connected to already established SocFi platforms.
For example, there is Friend.tech. It opened in beta in August, built on Coinbase ’s layer2 blockchain Base, and immediately attracted a lot of attention and plenty of revenue. However, there were soon concerns being voice.
TechCrunch reported concerns about a lack of privacy policy, the need to pay a deposit when you joined, laggy performance, and the roadmap being unclear.
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Friend.tech mirrors some of the functionality of Weixin/WeChat and Telegram Messenger . The difference is the requirement to pay a base amount to enter groups, accessing not only the chat, but also a share of the group. Users were required to deposit 0.001 ETH to join, with the promise that as the group grew, the value would rise, increasing the value of their ‘share’.
It’s an interesting model, but some, such as CoinGape News , questioned the long-term viability of this operation.
More concerning, in some ways, was a report by The Crypto Times , among others, that a data api vulnerability had allowed a database of more than 100,000 users leak.
Future of SocFi
There’s little doubt that SocialFi represents an interesting intersection of social media and finance, promising users more control, transparency, and potential financial benefits.
However, as with any burgeoning technology, it's essential to approach with caution. As the sector matures, one hopes to see robust solutions addressing these challenges, but not every platform has this yet – so research and caution are paramount.
At Moni Talks, we are live to these issues as we develop our platform, Talk Moni. Regular readers will know that regulation and security are paramount for us, and that will be reflected in our social community.
We also understand the need for long-term viability, a clear, deliverable roadmap, and the importance of utility. This will all be part of Talk Moni, without losing sight of its core purpose – creating a dedicated cryptocurrency community where all, newbies and experienced traders, can come together to chat, debate, exchange experiences, and share knowledge in an open, but safe, space.
I’ll be delivering an update on Talk Moni soon, so make sure you stay tuned to Beyond the Boardroom from Moni Talks.
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