Decentralized Storage Determines the Limit of SocialFi

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Author：橙子 Orange @ Contributor of PermaDAO

Translator：Bananaa @ Contributor of PermaDAO

Reviewer：Kyle @ Contributor of PermaDAO

Recently, I came across a statement: Friend.tech marks the beginning of a frenzied bull market in the Web3 social track, and Web3 SocialFi Summer is likely to occur at an unexpected moment! I do not deny that Friend.Tech has indeed excelled by rapidly building a ponzi scheme in the market through the binding and quantification of the interests of fans and KOLs, bringing significant wealth effects to players. However, in the end, it is still a dopamine financial game shaped by economic models, which has not fundamentally driven the development of SocialFi. The prosperity of SocialFi undoubtedly requires a bottom-up revolution, and data in the underlying architecture of social products has always been an unavoidable topic. This article focuses on the bottleneck nature of SocialFi development and its connection to data issues, and discusses the importance and significance of using decentralized storage in social products.

Where Is the Bottleneck of SocialFi?

I previously interned at a Web3 company that develops SocialFi products, with a product logic similar to Friend.Tech, revolving around KOLs and fan economics. So, regarding the question of this section's title, I had extensive discussions with my former boss until 4 AM and reached a conclusion: Current SocialFi applications are still too rooted in Web2 thinking. This is not the fault of product managers or founders. It's because nobody can clearly define what SocialFi is; the scope is enormous. Many Web3 social applications fall under the SocialFi category, but their product logics and economic models vary significantly. Moreover, there is no industry consensus on SocialFi, so everyone tends to mimic Web2 and add some ponzi economic models. That's the current state of Web3 SocialFi.

My former boss said something profound that night, and it kept me awake. His words were as follows:

"Most SocialFi projects exist for the sake of SocialFi itself. Many applications prioritize the 'Fi' part, which is not wrong because Web3 doesn't need purely social products. However, they haven't grasped the true essence of combining 'Social' and 'Fi.' Even though I don't know how to achieve this combination, it's not something that can be solved simply by adding ponzi elements and 'blockchain upgrades.'"

Indeed, Web2 social platforms like TikTok and WeChat are already established, based on high frequency, large-scale, and essential usage. Currently, Web3's efficiency and user numbers cannot match Web2. To surpass existing Web2 applications, Web3 SocialFi applications must be designed with a focus on human nature. Blockchain tokens are just an economic form, not the essence of Web3 social products. They should use blockchain to address certain human needs, such as survival, privacy, belief, and more.

Relying solely on token incentives to attract users for Web3 SocialFi applications has been disproven. Even if they become immensely popular, there will come a day when the hype fades. This approach cannot fully unlock the potential of the 'Social+Fi' combination. Beneath the application layer of SocialFi, a foundational layer must undergo a bottom-up transformation, and this transformation starts with data.

Why Do SocialFi Applications Need Decentralized Storage?

One of the crucial aspects of SocialFi is to give users true control over their data. This is a prerequisite and safeguard for the economic value of data generated by social applications. If current SocialFi products want to become true Web3 social products, they must pay attention to the underlying data storage. The way data is stored determines the user ceiling of SocialFi products and whether they can fulfill users' social visions in the Web3 era. So, what are the key features that an excellent SocialFi product in the Web3 era should possess?

1. Permanent Data Storage: Social applications need to store user-generated content like posts, images, videos, and other data. Traditional social media platforms often use centralized servers for this purpose. However, using a decentralized storage solution like Arweave ensures that user data is distributed across multiple nodes on the blockchain network, providing permanent storage and increasing data availability.

2. Resistance to Centralized Regulation: Web3 is a movement that values freedom, and Web3 social products should not curtail anyone's right to express themselves or subject content to extensive moderation. SocialFi products should adopt decentralized governance models like DAO, where community members collectively decide platform rules and content review standards. By drawing inspiration from organizations like PermaDAO, real community governance can be achieved quickly.

3. Decentralized Social Identities: In traditional social media platforms, user identities are often defined by the platform and tightly linked to it. In the Web3 era, SocialFi products should encourage decentralized social identities, allowing users to manage and control their social identities. This means users can use the same identity across different social platforms and are not restricted by a single platform.

4. User Data Privacy Protection: User data privacy is paramount in SocialFi products, which means users have complete control over their data, choosing who to share it with and what information to share. Users can also engage in social interactions anonymously and avoid third-party tracking or misuse of their data. Many applications now integrate Mind Network, jointly invested in by Arweave SCP Ventures and Binance Labs, which offers an out-of-the-box SDK for implementing privacy protection as a dynamic data layer.

5. Robust Creator Economy Mechanisms: Web3's economic model encourages user participation in social platforms. Through tokens, NFTs, and governance mechanisms, users can share their content, engage in social interactions, and contribute to the health of the social ecosystem. Users are no longer passive data providers; they become the protagonists of social networks, fostering more content creation and engagement.

6. Scalability and Cross-Chain Interoperability: A SocialFi product that can be promoted globally should achieve interoperability between different platforms and even across various blockchains. It also needs to provide data scalability to meet users’ needs for sharing content and interactions across different social networks. Building social applications based on the SCP paradigm allows for adding more storage nodes as per the actual requirements of user data. Currently, many on-chain applications utilize modular Permaweb standard services and API interfaces for endless product combinations, user flexibility, and portability of social data. This helps ensure that the user base for SocialFi products can continually expand.

To sum it up, the essence of these visions is to empower users with control and focus on decentralized data storage as the key. Decentralized storage can empower users with more control, allowing them to better manage their own data and decide whether to share or delete it. This maximizes user autonomy over their data while ensuring the full protection of their personal information and communication content.

It's reassuring to see familiar SocialFi applications like Mirror and Lens setting benchmarks for Web3 creator economies and decentralized social networks. Mirror, as a Web3 content publishing platform, stores articles on the Arweave blockchain network, the only solution that supports decentralized and permanent data storage (for at least 200 years). Many projects are actively embracing permanent data storage solutions because the value of Arweave extends beyond monetary measurement. Mirror users have complete control over their content, free from the limitations and censorship of any centralized organization.

SocialFi must be built on meaningful social interactions, even if it caters to niche needs. SocialFi products should explore the deeper meaning and essence of the integration of social and finance. They should also emphasize the importance and necessity of decentralized permanent data storage for social data. We look forward to the emergence of epic Web3 social products that truly meet user needs, and we await the arrival of the Web3 SocialFi Summer!

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