SocialFi was created by misreading its own medium
Author of article:Anderl
Articles compiled: Block unicorn
Foreword
As a writer, Substack's developments over the past few years have surprised me. What really made me stay is not what it did, but what it did. Substack doesn't fill my screen with interactive indicators or algorithms or turn each interaction into a performance. Every time I open it, I see a blank writing space, where I can find people close to or different from my point of view, as well as communities that I want or do not want to be involved. In this era of short content and a shorter life cycle, platforms like Substack have chosen a step-by-step path of building trust between creators and readers。
This restraint is extremely rare in most social networks. This is all the more evident when you step back and look at other platforms。
Most social media platforms were found to be suffocating with indicators, such as points of appreciation, sharing, browsing and promoting responses. All these factors together determine what you see in the flow of information. The platform has decided what it means, so you have no right to make any decisions. You don't interact, you start acting. Ultimately, over-optimization consumes the medium itself。
In today ' s article, Andre made similar points and gave more appropriate examples. Using McLuhan's “hot and cold media” theoretical framework, he explained why SocialFi collapsed, why NFT culture disappeared, and why a truly successful platform learned how to channel money without being controlled by it。
Media
McLuhan wrote so many words in 1964 that he lost most of his meaning: "Media is information". Now it sounds like a sign on a handbag. But if you stop and read it as an effective diagnostic method rather than a slogan, it is useful, especially for those who try to understand why so many recent attempts to integrate social networks and finance have failed slowly。
The actual arguments of McCluhan are much narrower and more peculiar than the slogan suggests. In his view, every medium would reshape the person who used it, not through what it conveyed, but through the signal it conveyed. A medium that transmits complete, high-resolution signals transforms users into receivers. A medium that transmits incomplete, low-resolution signals forces users to fill the gaps, and in the process they become participants. He referred to the former as “hot” and the latter as “cold”。
Prints are popular because they are written in full. Broadcasts are popular because they are fully produced. Lectures are popular because speakers control information. By contrast, telephone calls are cold because the sound itself sends too little information and listeners must build their own missing contexts. The cartoon is cold because the brain can finish painting. In McLuhan ' s analysis, television is cold because early signals are too low in resolution and viewing requires constant proactive reconstruction. He made a controversial point that was why television was more addictive than movies。
What is important here is not the specific examples of obsolescence, but the arguments behind them. The temperature of the medium determines what it produces. Hot and cold media promote consumption and participation. Moreover, it is essential for the next elements to be discussed that one medium cannot be transformed into another without changing the essence of the medium。
What does this have to do with social networking
In the words of McLuhan, much of what we call social media today is “cool”. A tweet is a piece of debris. A picture without context is a piece of debris. A "show" is also a piece of debris. These are not complete signals. Their significance can be seen only through the participation, response, transmission, discussion and association of others. A non-interactive post hardly counts. A post with 2,000 responses has completely turned into something else, even though its original content remains unchanged. This is the typical characteristic of what McCluhan calls the “cool” medium: works are incomplete when they appear and need to be used to be finalized。
This explains why social networking makes people feel like this: They are not content distribution systems, they are participation engines, but they are just ostensibly content. Those platforms that understand this have flourished, even if they never read McCluhan's theory. Most of the platforms that attempt to professionalize the participatory process and to provide passive consumers with information on the finished products eventually become marginalized。
Interestingly, what happens when someone tries to add economic elements to a great medium. It's in this context that SocialFi was created。
SocialFi, what are you trying to do
SocialFi's vision looks very good on paper. The argument is that social capital is a true economic value. People continue to create social capital, but the platform takes it all. If we can push social behaviour directly to the market, then those who really create value can also benefit from it. Each concern becomes an interest, each post becomes a tradable asset and each interaction has its price. In theory, a platform that is both a social network and an economy, where reputations can be traded and creators can receive real-time returns on the attention they create。
In the late 2023 weeks, the emergence of Friend.tech made it seem that this model would really be an emerging field. People sell each other's keys. Some influential people can even sell coins for thousands of dollars. It looks like a social network and operates like a securities account. Other projects have emerged rapidly, with each undertaking to achieve the same logic in a slightly different way. Postages, chat rooms that require registration to access, social tokens, the focus market and the economics of chain creators come from a variety of project brochures。
The whole area then collapsed. Friend.tech disappeared. Follow-up projects have largely failed to make breakthrough progress. The price of the coin fell and never recovered. By 2024, SocialFi had become a slightly awkward word that the founders would avoid in their next presentation。
The standard explains that it is a speculative cycle in which people participate for profit and then leave. That is true, but superficial. Speculation cycles do not explain the sharp decline in participation. People not only stopped trading keys, they stopped posting, reading and participating. Social and financial events have disappeared. Why
McCluhan's reading
A deeper analysis is that the failure of SocialFi did not stem from speculation. Speculation is a symptom, not a source. The problem is that the entire social networking industry is based on misinterpretation of its own media。
Social networking is a cool medium. Their value lies in the fact that participation in itself constitutes a signal, while the meaning is accumulated through repeated, low-resolution acts whose significance will only become apparent over time. SocialFi borrowed this medium and used a high-resolution signal-- - Prices - replace their constitutive signals - social behavior。
When you give a real-time, visible, tradable price to a “care” or post, you do not add an economic dimension to social media, but you radically change the medium itself. The new product is a clear signal that there are no more gaps to fill. “Concerning” is no longer ambiguous and represents a specific amount at this time. Once the signal is so clear, the rational response is no longer participation, but distribution。
That's why Friend.tech is not a social network in terms of its internal logic. It's more like a small reputation Bloomberg terminal, wearing a social network coat. Users are not publishing information, but are trading. Transactions happen to be carried out in each other ' s capacity, but this does not give the activity a social identity, but rather classifies it as a financial activity, with social clothing. Once financial dynamics have changed (stopped price increases, apparent opportunities for arbitrage had disappeared and speculative profits had declined), there is no social media at the bottom. The social dimension was consumed by the financial dimension at the beginning of its life。
That's exactly what McCluhan predicted. Thermal signals cannot coexist with cold media, which replace them. If one of the attributes of an act is an updated, universally visible current market price, then you cannot have a partial, vague, participatory-driven act. Price wins. It always wins because it is clearer than any other information on the screen。
The early designers of SocialFi thought they were building a bottom-up social network with economic functions. But in fact, they built a market in social clothing. Failure in this area does not stem from excessive speculation, but rather from the fact that it becomes a popular medium, which is still being promoted as a “cool” medium。
Why is it not just about encrypted money
One can easily interpret the article as an in-depth analysis of a small product category. But the same logic applies to a broader field, which explains a model dating back decades in the history of platform development。
The cold media will die if they overheated. This is not a metaphor, but a recurring pattern of failure. Those platforms that were initially low-resolution participating engines tended to add functions to enhance their resolution over time. For example, the certified account number, visible interactive indicators for all, the viewer-paying creator ' s fund and algorithms that accurately show the performance of the post. These additional functions seem harmless and even beneficial. In general, however, they depict a slow heat drift from cold to heat. The media are becoming clearer and better signals are becoming better and, ultimately, users move from participation to performance, from performance to consumption performance indicators, and gradually withdraw completely, as there are no gaps that can be filled。
That is why platforms that seem overwhelming during periods of peak user participation tend to become empty and boring in a few years. They have moved away from the area of real value creation. Twitter was cool around 2012, and Twitter around 2024 was mostly just hot. This shift is not the fault of anyone, but the result of all indicators, all profit patterns and the natural choices made by all product teams to improve signal clarity. It is the form that optimises when applied to a medium that does not need to be optimized。
SocialFi re-emerged the same trend in a fast-paced manner, compressing ten years to a few months. It starts with the hottest signal — real-time market prices — and skips the entire cooling phase when the media first gain influence. It has nothing to escape. Fire broke out on the first day, but quickly disappeared, as the hot media that did not spread the moat soon disappeared。
Way out: condensed points
If this diagnosis is accepted, then an obvious problem follows: Does that mean that any attempt to integrate social participation with capital is doomed to failure
No, because of the third option, early social finance was completely ignored. You can keep the media cool, gather capital at particular points within the media, not dissolve capital into the media itself。
This metaphor is based on physics. In a fluid that is mainly present in gaseous form, there are certain local conditions under which droplets are formed. The droplets are not gases, nor are the gases. The two coexist, and the interesting thing is the geometry of the region where condensation occurs. Most of the media remain in their original state, while a few become dense, liquid and capable of carrying loads。
Cold media operate in similar ways. It maintains a “cold” state of the substrate. Most media behaviour remains low-resolution, vague and dependent on participation. At certain moments, however, capital can aggregate itself into a social matrix and become a real, economically based and influential entity. The point is that these points of convergence are not the media itself, but are part of a local strengthening of the media. The rest of the media remained unchanged。
I think it's the right way to interpret certain platforms (which work quietly when SocialFi fails). Substack is a great writing platform. Writing itself is fragmented, continuous, cumulative, and is perfected by readers by responding, transmitting and quoting articles. Funding is concentrated at one specific point: regular subscriptions. Such subscriptions are a popular signal, a clear periodic price, but their structure is a long-term commitment rather than a spot transaction, which means that it will not pollute the other parts of the platform at sustained prices. You won't see a single article for real time tradable prices. The platform remains calm and funds are focused on subscriptions。
Bandcamp took the same approach to music. Wikipedia, on the other hand, does this by donating rather than charging for the number of editors. Patreon supports creators. These platforms have tactfully identified critical points where capital can enter without heating the entire medium. None of them attempted to price every social act. They all understand that gravity can only be sustained if the platform is “cool”。
The missing lesson of SocialFi is that capital and cool media can be compatible, provided certain conditions are met. Capital must be localized, infrequent, in an appropriate manner to maintain poor mobility and structurally separate from most social behaviour. It must serve as a rallying rather than a saturation. Once you try to make every act capitalized, you replace the social media with the economy. The economy, on the other hand, cannot produce the cumulative, vague and participatory meaning created by the cool media。
What happens next
One generation of projects has discovered this model, which, although not usually named in these terms, is gradually stabilizing. They often have some common features. It is based on a social or cultural product whose significance accumulates through participation。
If you want to sum up the lessons of the collapse of SocialFi in one sentence, maybe that's it: liquidity is heat. Adding it to the cryogenic medium does not increase the efficiency of the medium, but changes the medium so that it can no longer perform its original role。
Thus, the truly interesting design space is not how to price each social act, but is a more difficult and specific question: How can capital be built within a mechanism of stability without disrupting it? This question is almost unheard of. SocialFi failed to raise the issue because it was busy integrating everything into the market. Perhaps the next wave to be truly effective will be one that takes the McLuhan theory seriously and preserves as much as possible the very identity of the media。
A MORE TYPICAL NFT CASE
If SocialFi shows what happens when you build a hot medium and call it social media, NFT reveals a more inspiring aspect. They show what happens when you get a medium that's been running for centuries and that's been very cold and warm in real time。
Collections are one of the oldest “cool” media forms. Whether it is a browsing of record piles, walking through antique shops, exchanging cards in the school playground, or philatelic displays at club gatherings, the items themselves carry only half the meaning. The other half comes from participation, recognition, years of slow accumulation, stories related to specific collections, and what you find in communication with others. The value of the collection is low-resolution, vague and dependent on the context. But this is not a flaw. It is this mechanism that makes collection a cultural practice, not a simple transaction。
Early NFT waves in 2020 and early 2021 still retain some similar logic. CryptoPunks, initially a joke by people inside the encrypted currency circle, has a vague meaning, whose value comes more from shared culture than from price. The early issuance of Art Blocks has similar features. There was a forum, Discord, where people discussed individual works, shared stories and built communities. The collection itself is interesting, but the work itself is incomplete and requires participation to make sense。
The markets then matured and the heat drift began to emerge to such depth that they could be studied as a single case. OpenSea makes the price clear. The rareness tool quantifys each feature as a numerical score. Real-time graphs make each collection series like stock. Sniper robots make human reaction irrelevant. Fake trade volumes become a symbol of status. These characteristics, taken individually, are reasonable market optimization. But together, they move the medium from the cold door to the heat at an unprecedented rate。
THE RESULTS ARE ALMOST ASTOUNDINGLY CONSISTENT WITH MCCLUHAN’S PREDICTIONS. THE COLLECTOR BECAME A TRADER AND THE DEALER BECAME A ROBOT OPERATOR. THE ROBOT OPERATOR HAS SIMPLIFIED THE MEANING OF THE COLLECTION TO A MINIMUM PRICE, WHICH, ONCE IT FALLS, WILL CEASE TO EXIST. COMMUNITIES FORMED AROUND EARLIER COLLECTIONS HAVE NOT DEVELOPED INTO RICHER CULTURAL FORMS, BUT HAVE BEEN DISPERSED AT THE MOMENT WHEN THE MARKET STOPS VOLATILITY. THIS IS NOT THE ACT OF THE COLLECTOR. COLLECTORS WILL STAY WHEN PRICES FALL, AND THEY WILL CONTINUE TO COMMUNICATE, TRADE AND MAINTAIN THEIR COLLECTIONS. THE EXPERIENCE OF THE NFT COMMUNITY AFTER THE CRASH WAS NOT A MASS LOSS OF COLLECTORS, BUT EVIDENCE THAT THE REAL COLLECTORS NO LONGER EXIST. ONLY THE MARKET PARTICIPANTS WHO PRETENDED TO BE COLLECTORS WERE LEFT BEHIND, AND WHEN THE MARKET CLOSED, THEIR DISGUISES WERE REVEALED。
This is a better interpretation of the media topic than SocialFi. SocialFi is an emerging medium, which happens once in a while. Thus, its failure may be attributed to fresh senses or speculative cycles. NFT, on the other hand, uses a medium that has been in operation for centuries, has experienced war, technological revolutions and tides, destroying its operating mechanisms in just 30 months. This medium, which was working well, was destroyed by the platform; it was not an oversight, but an endless optimization. Each step makes the experience more accurate, measurable and efficient. But it also reduces the value of the collection slightly until at some point there is no longer any more to collect。
It is alarming that thermal drift is not occurring slowly. It may take place in product cycles, especially when the platform layer is constructed by people who are not aware that they are in a “cold environment”. They can always resist adding new indicators, rankings and real-time price information. Each of these additions will result in a slight increase in the temperature of the platform, which alone appears harmless. However, cumulatively, this will eventually lead to the disappearance of the practice model that the Platform should have carried。
