In the United States, 92 per cent of individuals reported concern over their privacy while using the internet, highlighting how recent massive data breaches and narratives around Big Tech data monetization have eroded internet users’ trust. This has been especially heightened by the rise of opaque artificial intelligence systems and evolving sociopolitical landscapes.

Gaps in regulation

While the European Union’s General Data Protection Regulation in 2018 set a benchmark as the first comprehensive legal act aimed at enhancing internet users’ privacy rights, it is not without its shortcomings.

GDPR and subsequent regulatory frameworks have largely been ineffective at enforcing and holding Big Tech companies, particularly Google and Meta, accountable for collecting and selling user data. Claims surrounding potential GDPR violations have reportedly taken years, sometimes more than four, to be handled. The delays stem from complex procedures involving multiple agencies and countries handling complaints against specific companies, creating significant backlogs and weakening the act’s ability to enforce and uphold its mandate.  

In the United States, the absence of federal legislation on data protection has led numerous states to take matters into their own hands. The US’s patchwork regulatory reality may create more harm than good, as variations on specific matters create endless compliance complexities for businesses operating across numerous states.

Users then receive varying degrees of data protection based on their location at any given time. Furthermore, for small- and medium-sized businesses, developing individual compliance programs for individual state regulators heightens costs that limit their ability to compete with Big Tech and other large corporations.

Meanwhile, Big Tech has been throwing its weight around with intense lobbying efforts, claiming any sort of legislation with real teeth to it will undermine innovation. While this is a discussion worth having, companies whose business model is highly dependent on data-based ad revenue don’t want increased consumer data protections. 

Despite heightened awareness surrounding the value and vulnerability of personal data privacy, centralized entities, in the form of Big Tech conglomerates and governments, hold powerful sway over our user data. Regulatory protections are usually welcomed, but the lack of transparency between the intentions of Big Tech and governments won’t repair the distrust many have toward both.

Web3’s heightened role

This is precisely where web3’s decentralized infrastructure can bypass centralized entities, whose interests may not align with most users, to provide a higher standard of data protection. 

Blockchain—and web3 more broadly—have had countless iterations and use cases of its technology designed to try and build wealth through games, crypto schemes, or other avenues. However, many projects and developers are either missing or choosing to ignore the potential they have in protecting user data.

Thanks to blockchain’s inherent encryption technology and immutable ledger, some web3-based privacy projects are staking their claim as an alternative to the current web2 system that dominates online interactions to profit from ad revenue. One such example is tomi, a DAO-governed project that leverages web3’s data-preserving strengths to create a decentralized, privacy-focused “alternative internet.”

tomi’s modus operandi is to champion security, data privacy, and freedom of speech throughout its operations and product offering. This includes offering services that advance its mission in material ways—including a VPN, storage, and private messaging service for its users to safeguard their browsing and communications by leaning into web3’s capacity for data privacy. Since the project is governed by a community and works on a unified model to keep the familiarity and UX of web2, tomi’s focus lies in making decentralized technology as intuitive and accessible as possible.

The reality is that as much as regular users would like to take more steps to preserve their data privacy, they’re unlikely to take these measures if there’s any inconvenience involved. This simple fact creates an obstacle that many web3 infrastructure projects don’t feel comfortable trying to overcome.

So, what is the takeaway here? For one, web3 projects must take themselves more seriously as champions of data privacy and protection within a cratered regulatory landscape worldwide. By stepping in with alternatives for those who are concerned about both Big Tech and regulatory overreach, developers have a strong and compelling use case that won’t fizzle out during a market downturn. However, preserving privacy cannot come at the expense of UX, and this must remain at the forefront if projects ever want a significant user base to transition to web3.

SocialFi is a web3 industry attempt at solving the problem of monetizing digital content—the genuine issue affecting millions of talented creators worldwide.

From the perspective of daily users, it might be hard to see creators struggling. However, despite producing quality content daily, the overwhelming majority do not make any money at all. Many SocialFi projects have been launched in the last couple of years, aiming to solve this very monetization part by rewarding every digital interaction for both creators and users. Unfortunately, most seem to have missed the mark by leaning too heavily on aspects of decentralization rather than offering real-world solutions to existing problems. 

The origins of mass interest in this space occurred during the pandemic lockdowns. With the idea of pursuing a passion-based career becoming more mainstream, the future of social monetization was catapulted into a new growth phase. This was also a time when the crypto industry saw a mass influx of retail investors, with industry narratives steering towards building pragmatic, real-world solutions. This led to significant advancement in the SocialFi movement, and plenty has been achieved since then in terms of on-chain innovation, tokenized community governance, integration of NFTs, and other DeFi products that authentically bridge issues around creator monetization and user rewards. 

Yet, as a sector claiming to be the future of the trillion-dollar creator and freelancer economy, the modest market cap of SocialFi tokens is over $2 billion. This indicates that the sector has a long way to go in establishing itself into a global financial ecosystem. Contrast this with DeFi’s market cap (around $70 billion) or even of NFTs (around $62 billion), and it’s clear that SocialFi has a long road ahead. 

Thankfully, there are signs that SocialFi platforms and the utility tokens that power them have a bright future. This is seen in the significant volume of new users willing to join a newly launched SocialFi platform. Sure, many of these users are only there for the free rewards, but that’s the current norm for web3, whether they like it or not.

The benefits of SocialFi

To benefit from such early user traction, builders in SocialFi must be real with themselves when designing a product. The reality is that very few creators care about (or will even benefit from) decentralized content ownership or on-chain proof of IP rights. Although this is a USP widely marketed in web3, it only benefits the top 1% of celebrity creators in the world. 

What about the masses? What USP will win their attention and loyalty? The answer to this holds the solution for how SocialFi platforms can finally win market share from Big Tech’s platforms, and central to this is building hybrid ecosystems. This means fusing blockchain features (such as tokenization) with non-blockchain architecture, providing an intuitive and seamless user experience for the masses. 

While DeFi and blockchain technologies have a variety of clear benefits and value, mass adoption won’t happen if web2 users are required to get past the web3 wall of creating a digital wallet, store a 20-word seed phrase, and interact with an unfamiliar user experience. If creating an account is harder than starting an Instagram account, you’ve already lost 95% of all potential users. From a user experience standpoint, people cannot be held back by the intimidating web3 gates. 

Appealing to the masses

The winners in this space will focus on the narrative that appeals to the masses, building a community of real creators, empowering them with web3 education, and implementing real-world token utility into a seamless user experience. That’s the formula for SocialFi’s success. 

Without a doubt, the SocialFi community is tackling these challenges, and 2024 remains a crucial year for projects in this space. The current wave of innovation is the most exciting one, as projects roll out user-centric features that focus on user experience and build upon the value that traditional platforms have already created for the creator community. Tokens matter, but as a secondary driver of growth, and should only exist as a medium to enhance the user experience. This realization will shape the sector moving forward.

Dave Catudal

Dave Catudal, co-founder of Lyvely, is an accomplished entrepreneur in tech and wellness with an extensive background in product innovation and e-commerce. Credited with founding several successful wellness ventures, Dave is building the future of SocialFi at Lyvely, integrating various aspects of web3 to deliver transparent monetization and engagement tools for the creator and freelance economy. Dave previously founded one of the GCC region’s fastest-growing D2C health supplement brands. He also holds a patent for his best-selling fitness machine and online program in the US.