SocialFi has failed to take off — Here’s what needs to change

Opinion by: Anurag Arjun, co-founder of Avail 

On paper, SocialFi is a no-brainer. It promises to shift the balance of power in social media — giving people control over how their content and personal data are used and monetized. It even offers users a stake in the $200+ billion social media advertising market, a pie currently devoured almost entirely by giants like Meta.

And yet, SocialFi platforms today feel more like digital ghost towns than the bustling hubs of Web2. Friend.tech, hailed as a breakout star in 2023, peaked at just 80,000 daily active users before falling below 10,000. What’s holding SocialFi back? Why does it seem to be following Friend.tech’s fade into obscurity rather than rising to rival Facebook’s dominance?

The harsh reality is that decentralized social networks have largely failed to attract and retain mainstream users despite genuine enthusiasm from Web3 communities. The fundamental promise of user ownership, data portability, and monetization remains compelling — but deep structural issues bottleneck adoption.

The technical hurdles

Blockchain infrastructure was never designed for the high-throughput, low-latency demands of social networking. Social media users expect instant results when posting pictures, liking comments, or following new accounts — actions that generate hundreds of millions of transactions daily across platforms like Instagram, TikTok and X.

Consider this: Ethereum handles just 15-20 transactions per second (TPS). Even Solana — often touted as a high-performance chain — with ~5,000 TPS falls short. Compare that to TikTok’s 25 million daily video uploads or X’s 500 million daily posts. Adoption becomes impossible when users face 30-second confirmation delays to comment on a post or volatile gas fees ranging from 10 US cents to $50 during network congestion.

Web2’s hard-won lessons 

Meta spends $35 billion annually on research and development to refine its platforms’ addictive simplicity. TikTok’s algorithm, honed through 1 billion hours of daily user engagement, delivers content so frictionless that 47% of users open the app immediately upon waking. The result? Interfaces where the tech disappears behind the experience.

By contrast, most SocialFi platforms confront new users with wallet popups, crypto slang, and variable fees. For mainstream users, it’s confusing and intimidating. A 2023 DappRadar study found that 92% of SocialFi users abandon platforms within 30 days. Until SocialFi applications can match the frictionless experience of their Web2 counterparts while delivering unique advantages, adoption will remain limited to crypto natives.

The fragmentation problem

Web3’s multichain world has splintered SocialFi into silos. Lens Protocol’s social graph doesn’t integrate with Farcaster. Friend.tech’s monetization tools don’t port over to DeSo. The result? A fractured experience with no network effects.

Recent: Avara’s Lens secures $31M for SocialFi-focused L2 blockchain

Consider if Gmail users had to pay to email someone on Outlook — and couldn’t bring their contacts or messages with them. That’s today’s SocialFi reality.

To solve this, decentralized identity systems like ENS and emerging standards like EAS must power portable, composable social graphs. A user’s content, followers, and reputation should travel with them — benefiting the broader ecosystem, not just one app.

Purpose-built infrastructure

The solution to SocialFi’s adoption challenges isn’t incremental improvements to existing models but purpose-built infrastructure explicitly designed for social applications. Just as horizontal scaling revolutionized Web2 infrastructure, modular blockchain architecture that separates concerns like data availability, execution, and settlement creates the foundation for social applications that can scale to billions of users.

The shift is already underway. Farcaster moved from Ethereum mainnet to Optimism’s layer 2 stack, prioritizing low-cost social interactions. Lens Protocol is migrating to ZKsync, using zero-knowledge proofs to scale while preserving user privacy. CyberConnect launched Cyber, its own L1 chain optimized for social applications, which now supports faster, cheaper interactions with an embedded social graph.

These purpose-built stacks mirror how Web2 scaled — separating data, execution, and storage to handle exponential growth. Web3’s version is modular architecture: rollups for performance, decentralized storage for media, and identity layers like ENS or Lit Protocol.

User-centric social networking

When built on the proper foundation, SocialFi can finally deliver on its core promise: putting users back at the center of the social networking experience. This means true ownership of identity and content, portable social graphs that work across applications, and fair value distribution to the people who create and curate content.

The opportunity extends well beyond fixing what’s broken in Web2 social media. True ownership enables creators to retain control and port audiences across platforms. Programmable money allows TikTok-esque viral trends to include instant revenue splits — imagine a dance challenge where 10% of ad revenue auto-splits among creators.

Combining programmable money with social connections, new interaction models become possible — from seamless tipping for quality content to automated revenue sharing for collaborative creation.

SocialFi’s early iterations have failed to gain meaningful traction beyond crypto enthusiasts. If we finally address the fundamental technical and user experience barriers, Web3 Social can deliver a disproportionate advantage over established platforms only Web3 can offer.

Opinion by: Anurag Arjun, co-founder of Avail.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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