As the use of encrypted social platforms and financial games continues to grow, the way they are built is also evolving. We can expect to see more projects in the future that are focused on verticalization, aiming to provide users with a more seamless and comprehensive experience, thus generating new consumer behaviors based on attention assets or social assets. While not all web3 social experiences are related to finance, the blockchain infrastructure that supports these crypto consumer applications can integrate new token incentive behaviors and digital native assets into social experiences.
The existing SocialFi stack consists of four core layers:
– Discovery Layer: Users discover items they want to purchase.
– Execution Layer: The buying and selling of assets.
– Liquidity Layer: Where assets are stored and pooled.
– Asset Issuance Layer: The creation of assets.
Currently, this stack is quite fragmented, with user discovery and social experiences being disconnected from execution (such as transactions), liquidity, and asset issuance. However, as the SocialFi space expands, various applications will continue to strive for verticalization in terms of attention and market, in order to have better control over users’ social experiences and the liquidity of attention assets.
SocialFi application developers need to have multiple layers of the SocialFi stack in order to build defensively. Attention asset trading (i.e., execution) and issuance are the commoditized layers of the stack – token issuance is becoming easier, and execution can be added anywhere there is attention. Having the discovery or liquidity layer will become increasingly important, as these are defensible layers with strong network effects.
In SocialFi, most applications fall into two verticalization approaches:
1. Trade-First Approach: Building a trading platform or marketplace where users can trade attention assets (e.g., Meme) first, and then evolving into a social/discovery platform.
2. Social/Discovery-First Approach: Building a social platform first and gradually incorporating financial elements. Making consumers/attention merchants key stakeholders of the platform.
Trade-First Approach:
Any social network or discovery platform faces significant challenges in today’s competitive attention market – guiding new social networks, inspiring new consumer behaviors, and maintaining user engagement. Given these obstacles, the trade-first approach is usually easier to launch because users’ interest in speculation helps overcome these challenges. However, this approach faces more competition, as trading platforms are easier to launch than social networks, and once a social network reaches a certain user density, it retains many advantages.
From a trade-first perspective, deep verticalization of the SocialFi stack has proven effective, as these applications have built-in attention trading functionality. For example, Friendtech has become one of the most vertically integrated SocialFi applications, controlling the entire stack. The app serves as both the center for user discovery and exclusive trading, utilizing a native financial element called a “bonding curve” to issue assets with Friendtech-specific features.
Some newer SocialFi protocols have also achieved vertical integration of the stack. Platforms such as Pump and Ape Store, which focus on Meme issuance and discovery, allow users to easily deploy Meme on a bonding curve. This enables users to buy tokens directly from the bonding curve without waiting for liquidity to be injected into decentralized exchanges or liquidity pools. While some initial Meme trading and discovery can take place on other platforms, such as Dexscreener and Twitter, Pump still provides a unique social discovery and trading platform for its newly released tokens.
Social/Discovery-First Approach:
Historically, the social-first approach in SocialFi has been successful through social platforms like Twitter, Farcaster, and Telegram, as well as market terminals like Dexscreener and Coingecko. Many of these applications have attempted to move downstream in the stack by offering token trading functionality, but they have not fully focused on providing a customized proprietary trading experience.
Telegram is an exception, successfully integrating social and financial experiences. However, Telegram’s user experience is limited, and despite its convenience being chosen by some deep crypto users, there is still demand in the market for an experience more similar to Robinhood – a seamless trading interface, convenient registration process, and retail-friendly features like commission-free trading. Additionally, new primitives like Farcaster Frames and Mirror Open Actions further facilitate new financial transactions in these social-first networks.
Final Thoughts: Staying Opinionated
Builders can create engaging social financial games and networks by understanding the impact of monetization and financialization on their applications in a unique way. The trade-first approach is easier because it does not necessarily require creating new consumer behaviors – people already want to trade attention. However, historically, the social-first approach has been successful because it controls users’ attention, not just the transactions themselves. The primary goal of the social-first approach is to iterate quickly, test new consumer behaviors and social financial dynamics until users show their preferences, which could develop into large social networks. I believe the most successful applications will be those with a strong stance and vertically integrated design, creating liquidity markets for new assets or inspiring new consumer behaviors in other ways.
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