CoinDesk Report:
Author: Mason Nystrom Source: @masonnyst
The internet is an attention marketplace, and competition for attention is growing exponentially. Cryptocurrency represents a new chapter in the story of attention economics, offering mechanisms to better evaluate attention through owned assets in content, social graphs, memes, algorithms, and platform social activities.
Cryptocurrency not only changes how attention is evaluated but also aims to redefine where attention derives its value. In 2016, Wu Xiuming introduced the term “attention merchant,” referring to publishers and later platforms profiting from user attention. Cryptocurrencies now offer users a path to reclaim their attention’s value by becoming attention merchants themselves.
A prominent example of this trend is within SocialFi, where users can possess flows of attention assets like memecoins, influencer access keys, and content. By creating pathways for users to directly engage with attention-based assets, SocialFi challenges traditional power dynamics in attention economics, transforming users from passive consumers to active participants—new attention merchants.
SocialFi Frontier
SocialFi is emerging as a definitive category within Web3. Encrypted social networks like Farcaster are flourishing, boasting over 75,000 daily active users (DAU). Telegram bots combine group messaging and transactions, driving transaction volumes into the billions of dollars. The information market is moving towards financialized social graphs, exemplified by Twitter (i.e., trend markets, fantasy.top) and Farcaster (i.e., Swaye, Perl, Arrina).
While not all social platforms come with financial incentives, SocialFi represents an evolution from indirectly assessing social capital to more effectively evaluating assets based on social and attention metrics. As a socio-economic technology, crypto enables social apps to add financial elements such as asset trading or integrate financial primitives natively into app layers (e.g., Friendtech’s SocialFi trend, driven by consumers’ desire to own and trade attention assets). Users opt to spend time on apps that allow them to earn money based on attention or engage in financial games to enhance social entertainment experiences.
For example, Fantasy, a collectible card game and information market based on X (formerly Twitter) social graphs, allows creators to monetize their social media influence while rewarding players for their intuition and knowledge of certain social accounts. Additionally, new social networks like Friendtech, Unlonley, and Sanko enable creators to monetize social interactions directly through chat access passes, rewarding early purchasers who focus their attention on undervalued creators and groups.
At the heart of these new information markets and social networks lies the concept that creators and users are now attention merchants, owning attention assets within these applications and monetizing attention through app usage.
Many apps have responded to users’ desires to embed commerce and finance into their social experiences:
Messaging → In-message transactions
Games → Ownable assets and in-game economies based on real money
Social → Ownable social graphs, channels, content, and platforms
Memes → Scene coins and derivative meme assets
Information markets → New markets for social entertainment, influencers, and social capital
Exchanges → Issuance of new protocols based on social and attention assets
Over the past year, the SocialFi ecosystem has rapidly expanded, with a surge in companies in attention asset exchanges (e.g., memecoin protocols), PvP (player vs. player) social games, new forms of information markets, and financialized social networks. This expansion is driven by advancements in crypto infrastructure in two key areas: scalability and usability, supported by enhanced developer tools (e.g., account abstractions and wallet-as-a-service tools), enabling new consumer experiences (e.g., mobile PWAs), cheaper transactions (e.g., L2s), and faster app iteration cycles.
Social Networks
Social networks roughly fall into two subcategories, each with its own creator monetization model:
Quasi-social and bidirectional.
Quasi-social networks are platforms where there’s a one-way relationship between creators and fans. These platforms typically integrate direct profit models like subscriptions (e.g., Substack, OnlyFans, Patreon) or direct ad revenue from creators (e.g., YouTube, TikTok).
On the other hand, bidirectional networks involve two-way relationships between creators and fans (e.g., Twitter, Reddit, Facebook, Snapchat). Bidirectional social networks allow users to profit through distribution, encouraging rather than limiting influence, akin to token-gated access (e.g., influencer-gated chats). Historically, bidirectional networks like Twitter and LinkedIn in Web2 have made it difficult for creators to profit directly through influence. Instead, creators have had to resort to affiliate programs, redirecting users to other profit-making sites (e.g., Twitter → Substack), or promotional activities.
SocialFi reimagines users as new attention merchants, offering various new profit options for both types of social networks. Quasi-social networks enable creators to further monetize the top 1/3 of their audience through tokenized content, influencer access, short-term perks (e.g., limited-time rewards), or social status. Quasi-social networks like Drakula and Friendtech tokenize content and creator influence respectively, allowing top creators to earn revenue from transaction volumes. Sofamon demonstrates a token model where individuals can gradually purchase an aesthetically pleasing item (e.g., avatar clothing) until they own a wearable complete item.
Web3 social networks provide new monetization options. One example is the monetization of usernames and namespaces, which can scale to millions of valuable namespaces. Conversely, bidirectional social networks can better utilize in-app transactions. This can manifest as in-network markets, channel storefronts, or in-app games.
The main difference between Web3 bidirectional networks and Web2 social networks is that new attention merchants (users and creators) will be able to derive more revenue from their activities. For instance, imagine if Reddit subreddit moderators could own their channels and earn revenue from displayed ads or earn a portion of revenue from transactions conducted through their channels.
PvP Social Games
With the maturation of consumer infrastructure, a new era of PvP (player vs. player) social games has emerged. Notable examples include Survivor-style competitions such as Crypto The Game and Blessed Burgers, offering users new digital-native and highly social gaming experiences to win valuable prize pools. Other apps like Carpet Fun or PvPWorld provide game theory strategy games where users can collaborate with others to win prizes. In contrast to Web2, where most mobile games monetize attention through traditional ads or offer ways for users to pay to play (e.g., bypassing cooldown periods), game developers now have new business models. These social games focus on fun rather than paying to win, with developers releasing multiple short-lived apps that shorten game cycles and allow users to earn substantial rewards through participation before moving on to the next game.
New social games should optimize for the following aspects: multiplayer aspects to increase engagement; playability to make ordinary users feel highly likely to win; social interaction to further enhance the viral spread of these games. These proposed game dynamics are more incentivizing than Web3 games, which historically tend towards pay-to-win or farm-first games rather than fun-first games.
New Markets and Exchanges
The dominant use cases for cryptocurrency revolve around market creation, particularly issuing new asset classes, tokenizing existing assets, or expanding access to digital-native assets.
Information Markets
Information markets like Polymarket have the potential to create more efficient political markets and support the creation of new event markets based on real-world events, culture, and business.
Attention Exchange
Platforms like Pump and Ape Market enable users to create new assets (e.g., memecoins) based on a quality: attention. Additionally, Sofaman allows users to monetize status and cultural tokens by creating digital avatars based on Telegram, selling branded clothing on joint curves.
Telegram Bots
Telegram bots bring markets and social finance games into the messaging experience, offering users a more convenient experience
Points and Pre-Tokens
Points have always been an effective incentive strategy for teams to test user behavior and try dynamic incentives. Points markets (like Michi and WhalesMarket) and pre-token markets (like Aevo) can help create more efficient token markets.
Several sub-trends are driving the creation of new markets and exchanges. First, the rise of vertical social and financial platforms is pushing these apps to issue new types of assets. Second, users are increasingly gaining ownership of on-chain activities through earning points, rewards, and tokens, expanding the asset surface area with which users can interact, thus encouraging the creation of new trading venues. Finally, users are now interacting with assets like memecoins, feeling a greater sense of autonomy. Similar to cultural assets in the real world (e.g., sneakers or music), users perceive control over the popularity and potential appreciation of these cultural assets, as the primary metric defining asset value (user attention) is controlled by end consumers.
Creating New Attention Merchants
The social realm is undergoing a paradigm shift, where the dynamic relationship between users, creators, and attention is being redefined. At the core of these trends is the shift of users and creators from suppliers and demanders in the attention economy to becoming merchants of their own attention.
Designing new financial or social elements is undeniably challenging, let alone integrating the strengths of both into unified elements. Early social finance tools, toys, and games that become the next era of SocialFi networks and apps are those that rapidly experiment, test new consumer behaviors, leverage emergent behaviors, and reveal consumer preferences.
