Site icon Forkast

How the market is evolving from GameFi to SocialFi — and what comes next

social media network diagram PPFYH5E 4

Social media network or people communication diagram drawn on paper using red color pen

A blockchain is a database that can record all transactions and transfers for the entire world. All users can use public blockchain explorers to verify all data is correct.  Blockchain facilitates transactions of virtual currencies like Bitcoin and Ethereum. Transactions that take place are fast, cheap, tamper-proof and irreversible. 

But blockchain technology is not limited to digital currencies — the technology also has applications across numerous industries, including healthcare, hospitality, retail and government. Using hospitals as an example, blockchain can enable the secure transfer of patient medical records. It can also manage the medicine supply chain to significantly reduce costs and improve efficiency.

Smart contracts are super-charged blockchain technology that enables the existence of decentralized finance (DeFi) and non-fungible tokens (NFTs). These are allowing artists and creators to find new ways to monetize content. Let’s now examine the latest innovations in DeFi, including GameFi and DeFi 2.0 — and what to expect next.

Reshaping the value of blockchain games with NFTfi and the metaverse

GameFi is a combination of blockchain and the gaming environment, allowing users to potentially earn money just by playing games (known as P2E games). Any game in existence now can be made into a blockchain game, with no restrictions on single or multiplayer modes with virtual reality environments. NFTs have been the fuel of these games, giving a use case to something notoriously previously known as “just a piece of art.” 

Axie Infinity is a notable example in the category of GameFi. Users can buy NFTs that are Axies. These Axies are in-game characters that can battle each other. The winners earn tokens from these battles. Axie Infinity has garnered over 800,000 concurrent players at this time of writing. Statistics show that most users came from developing countries such as the Philippines, Indonesia and Thailand.

Another common buzzword you might hear about is the metaverse. The metaverse is an integration of augmented reality and virtual reality alongside blockchain technology. It is a virtual world that can be inhabited by potentially an unlimited number of people, all at the same time. 

The expansion of projects in the metaverse category has spurred the innovation behind VR technology, building communities of like-minded individuals.

In the metaverse, users can live and work in a shared virtual space. Where people congregate, people will socialize — which gives rise to yet another new innovation in DeFi: SocialFi.

From GameFi to SocialFi

With the increase in popularity of digital platforms such as Twitter, Facebook and Instagram, the impact of social media on our lives is clear. SocialFi is a combination of social media + finance, but it is transitioning to social media + DeFi. SocialFi is social influence on any medium that can be tokenized, allowing influential figures to get direct monetary benefits from being on SocialFi platforms. 

Social tokens are defined as “a token supported by a personal reputation, brand or community.” Social tokens with the expectation that the value of the community will continue to increase, increasing the value proposition for all entities involved.

Such propositions include casting and distribution and content capitalization.

Almost all blockchain projects have one common goal: to accelerate the mass adoption of blockchain and cryptocurrency. Social media on the blockchain could be the key to this mission. However, the idea of mass adoption is still a long journey ahead. At this moment, there are only over 300 million crypto users out of the world population of 7.9 billion people. The growth potential is uncapped.

DeFi, NFTfi and SocialFi — what’s next?

The narrative in crypto changes every few months. It is impossible to know exactly what the next big thing is in this space. However, the category of DeFi 2.0 seems like a promising way to mitigate the issue of liquidity provisioning. 

DeFi 2.0 is a movement of projects with a collective objective to improve the existing limitations of DeFi 1.0. The first issue that DeFi 2.0 aims to solve is the scalability issues. Most projects interact with Ethereum, well-known for its high gas fees and long waiting time. This has led to cost-inefficiencies that have resulted in a lack of DeFi adoption. 

DeFi 2.0 promotes interoperability with other blockchain networks by bridging assets with different chains, ensuring enough liquidity assets on one chain that can be traded between sufficient pools across the chains. A long-standing issue in DeFi 1.0 is that renting liquidity from the global crypto population requires incentives for liquidity provisioning, which has to be paid out in the project’s native token. This causes downward selling pressure. When liquidity is rented, it is not loyal. Users acquire rewards and leave for the next project that offers better yield. 

DeFi 2.0 facilitates protocol-owned liquidity (POL). This means that almost all liquidity pool tokens are owned by the protocol, essentially meaning that DeFi 2.0 protocols generate revenue from transaction fees. 

DeFi 2.0 becomes increasingly simple and approachable as it allows traditional financial services to integrate DeFi 2.0 protocols into their platforms through APIs and oracles. It connects blockchains to external systems; therefore, the integration will enable users to use decentralized financial protocols from centralized financial applications and web interfaces. DeFi 2.0, however, will present a new set of challenges and solutions — topics for another discussion. The crypto space is still young, and there is plenty of room for innovation.

Exit mobile version