SocialFi Fizzled Out, Now It's Set For A Comeback.

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SocialFi, the fusion of social media and decentralized finance, flew out of the gate then rapidly flamed out. High profile startups like Friend.tech and Farcaster lost users in droves thanks to flawed business models that placed too much emphasis on social – not enough on trading gains.

Some analysts have declared the sub-sector DOA, but the idea of a new form of DeFi based on user ownership, collaboration, and content monetization hasn't lost its appeal.

As SocialFi’s first wave subsides, new projects are looking to balance the social/finance equation. Will they be able to release its potential?

From promise to poverty

2023 was a big year for DeFi’s attempts to go social. While funding for new crypto projects dipped, SocialFi startups like Friend.tech, RepubliK, and Phaver (now SocialDAO) were able to secure $6 million-plus deals.

Up to that point, SocialFi was a collection of garage-band ventures aimed at liberating social media, flowing content ownership and revenues away from intermediaries and back to creators.

These new players allowed social influencers to tokenize their clout, selling NFT-based ‘keys' to exclusive content and chat rooms that followers could buy or sell.

Users loved it, until they didn't. Within a few months, Friend.tech’s transaction volume cratered and users stopped logging in. Copycat project Post.tech replicated the rapid decline, followed by Friendzy, Friend3, Stars Arena, and Cipher.

Farcaster, another breakout SocialFi hit, managed to stay afloat, but only after an awkward pivot that morphed it into a kind of LinkedIn for crypto insiders.

Friend.tech's lonely X bot keeps auto-posting ‘top 5 clubs' updates to nearly 150k followers, but the project's founders abandoned it in late 2024.

Just another one of crypto's speculative frenzies, or was there something to it?

Too much social, not enough finance

SocialFi 1.0 had the same weakness that plagues all the ‘Fi’s’ from DeFi on down – the Web3 user experience (UX).

Consider Friend.tech’s cautionary tale.

Launched in August 2023, the platform allowed users to buy and sell tokens linked to accounts on X. A month after launch, it had attracted a bevy of social influencers including NBA players, esports stars, crypto personalities, and OnlyFans creators.

Daily trading volume reached $10 million in September 2023. By October, more than 600,000 X accounts were estimated to have logged in to the site.

Then something odd happened. After launching the platform's V2 in September 2024, the project abruptly transferred control of its smart contract to a null Ethereum address, effectively stopping new features or updates.

It turned out the project had made less than $21 (twenty-one dollars total) in the previous 30 days. Further analysis showed that revenues and user activity had fallen precipitously in December 2023, kicking off a long, drawn-out decline.

Friend.tech's fall took SocialFi down with it. After peaking at around $50 million in total value locked (TVL) and ca. 400,000 transactions per day in October 2023, the SocialFi sector went into free fall. Figures from DeFiLlama and Cryptokoryo show that TVL dropped by a quarter, and daily transactions fell by 98%.

What killed it? In a post-mortem for Tiger Research, crypto analysts Chi Anh, Ryan Yoon, and Yoon Lee blamed poor user experience and no coherent development roadmap to address it. They stated:

"Lack of new functionalities caused the platform to lose its novelty, and user engagement dwindled rapidly. This stagnation directly affected user loyalty, as the absence of continuous updates led many early adopters to abandon the platform."

But even then, DeFi was rapidly ovecoming its interface issues. The truth is that SocialFi 1.0 was too heavy on social, too light on finance. Influencers may have loved it but rank & file users – especially those looking for gains – felt under-served.

A re-balancing is underway

While SocialFi’s early entrants fade from memory, here are two up-and-coming projects that exemplify its re-set.

Dyor

DeFi is packed with opportunities, but navigating it has always been a challenge. Amid the endless noise of new airdrops, network upgrades, complex tools, and volatile markets, even seasoned crypto traders can struggle to locate reliable signals.

Enter Dyor, a socialFi platform that aims to simplify decentralized investing with AI. Its latest app update blends artificial intelligence with community-driven trading, using social to make finance more collaborative, informed, and profitable.

Glympse.fun

What if you could turn social engagement into an investment opportunity? That’s the promise of Glympse.fun. The Solana socialFi project operates as an attention marketplace, letting users to bet on the liklehood of an image, video, or musical competition going viral.

Similar to a prediction market, users can trade on social trends. If a piece of content gains traction, traders who bet early hav an opportunity to earn rewards.

The take away

On paper, SocialFi's crypto / social-media mashup should be a no-brainer.

A forecast by Goldman Sachs predicts the creative economy will be worth $470 billion by 2027. Globally, creators and influencers are close-knit group operating with similar aspirations and a shared world view. That sounds a lot like the crypto community.

The two should be a natural fit, but until SociaFi platforms let users profit alongside their favorite influencers, common ground will be hard to find.

Featured Image: Generated by Author with AI assistance