Author: Mason Nystrom Source: @masonnystrom Translation: Shan Ouba, Golden Finance
The internet is an attention market, and competition for attention is growing exponentially. Cryptocurrency represents a new chapter in the attention economy story, providing a mechanism to more effectively value attention through ownable attention assets in content, social graphs, memes, algorithms, and platform social activity.
But crypto not only changes how attention is valued, it also has the potential to change the source of its value.
In 2016, Wu Xiuming coined the term “attention merchants” to refer to the way publishers, and later platforms, use users’ attention to profit. Cryptocurrency creates a path for users to become their own attention merchants, reclaiming the value of our attention through ownership of attention assets.
The most notable example of this trend is in SocialFi, where users can own attention streams to assets such as memecoin, influencer access keys, content, and more. By creating a path for users to directly participate in attention-based assets, the SocialFi platform challenges the traditional power dynamics of the attention economy, transforming users from passive consumers to active participants - the new attention merchants.
The SocialFi Frontier
SocialFi is becoming a defining category in web3. Crypto social networks like Farcaster are thriving with over 75,000 DAU. Telegram bots combine group messaging and trading, facilitating billions of dollars in transaction volume. Information markets are now moving in the direction of financialized social graphs, such as Twitter (i.e. Trending Markets, Fantasy.top) and Farcaster (i.e. Swaye, Perl, Arrina).
While not all social platforms come with financial incentives, SocialFi represents an evolution in social, from indirectly valuing social capital to more effectively valuing assets based on social and attention. As a socio-economic technology, crypto enables social applications to add other financialized elements (e.g. asset trading) or integrate financial primitives natively into the application layer (e.g. SocialFi by Friendtech) The trend is driven by consumers’ desire to own and trade attention assets. Users choose to spend time on apps that allow them to earn money based on their attention, or play financial games to enhance the social entertainment experience.
For example, Fantasy, a fantasy sports trading card game and information marketplace built on the X (formerly Twitter) social graph. Fantasy allows creators to earn money from their social media influence while allowing players to be rewarded based on their intuition and knowledge of certain social accounts. In addition, new social networks such as Friendtech, Unlonley, and Sanko allow creators to directly monetize social interactions through chat access passes. This benefits users who purchase access passes in advance, rewarding them for bringing attention to undervalued creators and groups.
The core advantage of the new information marketplaces and social networks is that creators and users are now attention merchants, owning attention assets in these applications and monetizing that attention through application usage.
Many applications have responded to users’ desire to embed commerce and finance into their social experiences:
Messaging → In-message transactions
Games → Ownable assets and in-game economies based on real money
Memes → Scenario coins and derivative meme assets
Information markets → New markets for social entertainment, influencers, and social capital
Exchanges → Issuing new protocols based on social and attention assets
Over the past year, the SocialFi ecosystem has grown rapidly, with a surge in the number of companies in the fields of attention asset exchanges (e.g., memecoin protocol), PvP (player-versus-player) social games, new forms of information markets, and financialized social networks. The driving force behind this expansion is the maturity of crypto infrastructure in two aspects, scalability and usability. It supports new types of consumer experiences (e.g., mobile PWAs), cheaper transactions (e.g., L2s), and faster application iteration cycles through improved developer tools (i.e., account abstraction and wallet-as-a-service tools).
Social Networks
Social networks can be roughly divided into two subcategories with their own creator monetization models: quasi-social and bidirectional.
Quasi-social networks are platforms with a one-way relationship between creators and fans. One-way relationships are usually combined with direct monetization models, such as subscriptions (e.g. Substack, OnlyFans, Patreon) or by charging advertising revenue directly to creators (e.g. YouTube, TikTok).
On the other hand, two-sided networks are networks with a two-way relationship between creators and fans (e.g. Twitter, Reddit, Facebook, Snapchat). Two-sided social networks allow users to monetize through distribution, thereby encouraging influence rather than restricting it, as is the case with token-gated access (e.g. influencer-gated chats). Historically, Web2 two-sided networks like Twitter and Linkedin have made it more difficult for creators to monetize influence directly. Instead, creators have had to resort to strategies like affiliate programs, directing users to other monetization sites (e.g. Twitter → Substack), or promotions.
SocialFi reimagines users as new attention merchants, providing a variety of new monetization options for both types of social networks. Quasi-social networks allow creators to further monetize the top 1/3 of their audience through tokenized content, influencer access, ephemeral benefits (e.g. limited-time rewards), or social status. Quasi-social networks Drakula and Friendtech tokenize content and creators, respectively, enabling top creators to earn revenue from transaction volume. Sofamon showed an example of a token model where individuals could slowly purchase an aesthetic item (e.g. avatar clothing) until they own an entire item that they can wear.
Web3 social networks offer new monetization options. One example is username and namespace monetization, which can scale to millions of users for valuable namespaces. On the other hand, two-sided social networks can make better use of in-app transactions. This could take the form of an in-social network marketplace, channel storefronts, or in-app games.
The main difference between web3 two-sided networks and web2 social networks is that new attention merchants (users and creators) will be able to earn more from their activities. For example, imagine if subreddit moderators could have their own channels and earn revenue based on the ads they display, or earn a portion of the revenue from transactions conducted through their channels because of the communities they manage.
PvP Social Games
As consumer infrastructure matured, it opened up a new area of PvP (player versus player) social games. Most notably, a wave of Survivor-like competitions emerged - including Crypto The Game, Blessed Burgers, and others - providing users with new digitally native and highly social gaming experiences to win valuable prize pools. Other applications, such as Carpet Fun or PvPWorld, offer game theory strategy games where users can cooperate with others to win prizes. In stark contrast to web2, most mobile games monetize attention through traditional advertising or provide users with ways to pay to play games (e.g., users do not have to wait for a cooldown period). Game developers now have new business models, social games similar content, developers release multiple short-lived applications, shorten the game cycle, and users can earn rich rewards for participating before moving on to the next game.
New social games should be optimized for: multiple winners, thus increasing engagement; ease of play, so that the average user feels like they have a high chance of winning; and social interactions, further enhancing the virality of these games. These proposed game dynamics are more incentivized than web3 games, which have historically tended toward pay-to-win or farm-first games rather than fun-first games.
New Markets and Exchanges
The leading use cases for cryptocurrencies revolve around market creation, specifically issuing new asset classes, on-chaining existing assets, or expanding access to digitally 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 commerce.
Attention Exchanges - Platforms like Pump and Ape Store let users create new assets (e.g. memecoins) based on one quality: attention. Additionally, Sofaman tokenizes status and culture by letting users create Telegram-based digital avatars to sell branded clothing on a bonding curve.
Telegram Bots - Telegram bots bring marketplaces and social finance games to the messaging experience and provide users with a more convenient experience
Points and Pre-Tokens - Points have been an effective incentive strategy for teams to test user behavior and experiment with dynamic incentives. Points marketplaces (like Michi and WhalesMarket) and pre-token marketplaces (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 verticalized social and financial platforms is driving new types of assets to be issued by these applications. Second, users’ increasing ownership of on-chain activities through earning points, tips, and tokens increases the surface area of assets that users can interact with, encouraging the creation of new trading venues. Finally, users are now interacting with assets such as memecoin, and they feel a greater sense of autonomy. Similar to real-world cultural assets (such as sneakers or music), users have a sense of perceived control over the popularity and potential appreciation of these cultural assets because the fundamental metric that gives the asset value (the user's attention) is controlled by the end consumer.
Building New Attention Merchants
A paradigm shift is taking place in the social space, and the dynamic relationship between users, creators, and attention is being redefined. At the core of these trends is the transformation of users and creators from the supply and demand side of the attention economy to being able to become merchants of their own attention.
It is undeniable that it is very difficult to design new financial or social elements, let alone elements that merge the best of both into a unified experience. The early social finance tools, toys and games that will become the next era of SocialFi networks and apps will be those that run experiments quickly, test new consumer behaviors and exploit emergent behaviors and reveal consumer preferences.