Why pricing social interactions is destined to fail?

Original Author: Anderl

Original Translation: Saoirse, Foresight News

In the past few years, Substack's development has been truly surprising. What really makes creators willing to stay on this platform is not what it actively does, but what it deliberately chooses not to do.

Substack won't cram your page with various engagement metrics and algorithmic feeds, nor will it turn every content interaction into a deliberate performance. Every time you open the interface, it's a clean, pure creative space; you can meet creators with similar or opposing views, and find communities you want to engage with or can freely ignore. In an era of overflowing short-form content and increasingly fleeting lifecycles, Substack has chosen a slow lane, slowly building trust connections between creators and readers.

This sense of restraint is extremely scarce in the vast majority of social networks today. Just step out of your usual perspective and look at other platforms, and you'll see this more clearly.

Most social platforms today feel oppressive: pages are filled with various metrics like likes, reposts, views, pinned replies, and more. These indicators collectively determine what content appears in your feed. The platform has already defined all the value of the content for you, leaving almost no room for users to interpret on their own. Users gradually transform from participants into a performance audience. When platforms excessively pursue data optimization and pile on metrics, the medium itself tends towards self-consumption.

In this article, the author delves into this viewpoint and provides more apt examples. He uses McLuhan's hot and cold media theory to explain three things: why SocialFi collectively collapsed, why NFT culture quietly dissipated, and how truly sustainable platforms manage to maintain balance – allowing capital to enter, but not letting it devour the entire ecosystem.

Let's dive into the main text.

In 1964, McLuhan wrote a phrase that has been quoted so often it has lost its original profound meaning: The medium is the message.

Today, this phrase seems like a trendy slogan printed on cloth bags. However, if we move beyond cliché interpretations and apply it as a practical analytical logic, we find it immensely valuable, especially in helping us understand: why nearly all attempts in recent years to deeply integrate social networks with finance have ultimately headed towards collapse.

McLuhan's real viewpoint is more specific and profound than the stereotypical public interpretation: Every medium reshapes its users. This change is not based on the content the medium transmits, but on the signal form it outputs.

A medium capable of transmitting complete, high-definition, mature signals shapes users into passive receivers. Conversely, a medium that can only transmit fragmented, information-deficient signals forces users to actively fill in the gaps, turning them into active participants in the process.

McLuhan defines the former as hot media and the latter as cool media.

Print is a hot medium – the content on the page is finalized and complete. Radio is a hot medium – the program content is already produced. An in-person lecture is a hot medium – the speaker has complete control over the information output.

Conversely, cool media: A phone call is a cool medium – the audio information alone is limited, requiring the listener to mentally fill in the context. A comic strip is a cool medium – the images have gaps that require the viewer's brain to fill in the visual details. In McLuhan's analysis, early television was also a cool medium – due to low resolution, viewers needed to constantly and actively reconstruct the image information. He also proposed a contentious point: this is why TV is more addictive than film.

We don't need to dwell on these somewhat outdated specific examples; the core logic is key: the hot or cool nature of a medium determines the user's behavioral patterns.

Hot media fosters passive consumption, cool media fosters active participation. The most crucial point: hot and cool media cannot be forcibly transformed into each other. If you deliberately tamper with them, the essential nature of the medium changes completely.

What Does This Have to Do with Social Networks?

Using McLuhan's theory to define it: the vast majority of social media we talk about today are essentially cool media.

A tweet, an image posted without context, a like – these are all fragmented pieces of information, not complete signals in themselves. Their meaning can only be formed through the participation, replies, reposts, and chains of conversation of others. A post with zero interaction has almost no value; but a post that receives two thousand replies can generate entirely new connotations, even if the original text hasn't changed a single word. This is a typical characteristic of cool media: the content itself is incomplete, and its value needs to be completed and given meaning through user participation and interaction.

This also determines the underlying logic of social networks: they have never been simple content distribution tools, but engagement engines centered around participation, even though they look like content platforms on the surface.

Platforms that understood this, even if they had never encountered McLuhan's theories, have thrived. Meanwhile, those that tried to professionalize participation, push finalized complete content to users, and turn users into passive receivers have gradually become marginalized.

Interestingly, the problems arise when people try to overlay an economic and financial logic onto social platforms that are inherently cool media – this is the background against which SocialFi appeared.

What Did SocialFi Originally Aim to Do?

The vision of SocialFi was theoretically perfect: social capital itself has real economic value; users continuously create social value, yet the benefits are entirely harvested by the platform.

If social interactions could be directly incorporated into a market trading system, ordinary people creating value could capture their own gains. Every follow relationship becomes an equity share, every post becomes a tradable asset, and every social connection is assigned a clear price.

Theoretically, this would form a social network with its own built-in economic system: personal reputation would have a market price, and creators could instantly capture the value of the attention they generate.

In late 2023, with the explosion of Friend.tech, this logic seemed feasible. People were buying and selling social keys, with the initial price tags for influencer accounts running into thousands of dollars. The interface looked like a social network, but its internal operation was indistinguishable from a securities trading account.

Soon, a flood of similar projects emerged, employing broadly similar mechanics: social stamps, private communities, social tokens, attention trading markets, on-chain creator economies… Countless business plans were everywhere.

But quickly, the entire sector collapsed spectacularly.

Friend.tech's hype faded, and subsequent copycat projects failed to achieve scale; token prices plummeted with no room for recovery. By 2024, SocialFi had become an awkward term within the industry, a topic entrepreneurs were reluctant to mention in new project pitches.

The mainstream market explanation is: it was just a speculative cycle; people came for profit, and left when there was no profit to be made.

This statement isn't entirely wrong, but it's too superficial. The speculative cycle explanation cannot account for the complete collapse of underlying social participation: people didn't just stop trading shares; they stopped posting, browsing, and being active. As the financial hype faded, the social ecosystem also completely died.

What was the root cause?

Deconstructing the Essence with McLuhan's Theory

The deeper truth is: the failure of SocialFi was never about speculation; speculation is just the symptom, not the root cause. The entire sector, from its very inception, was built upon a fatal misunderstanding of its own media properties.

Social networks are inherently cool media: their value derives from user participation in completing signals; social interactions are fragmented and ambiguous, accumulating value over time through sedimentation. What SocialFi did was directly replace the underlying signal of social interaction with a high-definition signal – real-time price.

When you attach a real-time, visible, freely tradable price tag to a follow action or a post, you are not overlaying an economic layer onto a social medium; you are directly replacing the medium itself. The formerly ambiguous, open social interaction becomes a completely finalized financial signal with no room for interpretation: a follow no longer carries social emotion and identification, but is equivalent to a specific dollar price at that moment.

Once the signal is completely finalized, the user's rational behavior is no longer to participate and interact, but to engage in asset allocation and profit-seeking.

This also explains the true nature of Friend.tech: it was never a social network at its core; it was just a miniature personal reputation price terminal disguised with a social interface. Users seemed to be posting and socializing, but they were actually engaged in trading games the entire time. Social vocabulary was just the outer shell; the core was entirely financial behavior.

Once the financial tide turned – prices stopped rising, arbitrage opportunities disappeared, speculative returns declined – there was no native social ecosystem underneath to provide support. From the moment of its creation, the financial attribute had already cannibalized the social attribute.

This is precisely what McLuhan's theory had predicted: hot signals cannot coexist with cool media; they will directly replace them.

When an ambiguous, open social interaction requiring participatory interpretation simultaneously carries a market price visible across the network and updated in real-time, the price will always dominate – because it is the most certain and unambiguous signal on the page.

The fallacy of early SocialFi designers was this: they thought they were building a platform of "underlying social + upper economy," when in reality, they created a product of "financial market + social shell."

The sector collapsed not because of rampant speculation, but because the platform had quietly transformed from a cool medium into a hot medium, while still claiming to be a social network with cool media properties.

Beyond the Crypto Circle: The Applicability of This Logic

Don't view this merely as a post-mortem of a niche product sector. This logic is universal and can explain common platform dilemmas spanning decades.

Once a cool medium becomes overheated, it heads towards extinction. This is not a metaphor, but a recurring pattern of failure.

Many platforms start as low-information-density, participation-based cool media. However, they continuously pile on features, gradually increasing information certainty: verified account badges, public full interaction data, creator funds settled based on view counts, precise algorithmic rankings… Each of these features seems harmless individually and may even improve user experience. But collectively, they cause the platform to drift from cool to hot.

Media signals become increasingly finalized and standardized. User mentality shifts from participatory creation to deliberate performance. Then comes addiction to data metrics, leading ultimately to complete user churn – because there is no longer any white space left for users to interpret and co-create on their own.

This is why many platforms that seemed irreplaceable at their peak become empty and listless within just a few years: they discarded the cool media properties that were the source of their value creation.

Twitter around 2012 was a typical cool medium; the Twitter of today has long degenerated into a hot medium.

This property drift is not attributable to any specific party, but is a natural tendency of all data metrics, commercialization, and product optimization: the pursuit of precision, quantifiability, and high efficiency is itself a process of "heating up" a cool medium – and such media are not meant to be over-optimized.

SocialFi compressed this slow, decades-long drift into a rapid evolution lasting just a few months. From its inception, it was equipped with the hottest signal – real-time market pricing – skipping the necessary stage of ecological accumulation characteristic of cool media. Without native social depth for support, it was a hot medium by birth; and hot media without traffic moats are doomed to perish extremely quickly.

The Path to a Breakthrough: Capital Condensation Points

Agreeing with this logic leads to a question: Is the integration of social participation and capital doomed from the start?

The answer is no. There is another path completely overlooked by early SocialFi: preserving the overall cool property of the medium, allowing capital to only condense and precipitate at specific nodes, rather than permeating every social interaction.

This inspiration comes from a physical phenomenon: a fluid maintains its gaseous state overall, only condensing into droplets under specific local conditions. The droplets are not the gas, and the gas is not changed by the droplets. The key to their coexistence lies in controlling the location and boundaries of condensation.

Cool media platforms can follow the same logic: maintain the overall cool property of the underlying layer, keeping the vast majority of social interactions fragmented, ambiguous, and reliant on user co-creation. Only at predetermined, specific nodes should capital be allowed to condense from the social ecology, forming fixed contact points with financial value.

The key point: these capital contact points are localized intensifications within the medium, not the medium itself; the rest of the ecosystem remains entirely in its native state.

Platforms that have quietly found a successful model, far surpassing SocialFi, precisely understand this principle: Substack is a cool medium for written creation, with fragmented, continuously updated content whose value is completed by reader replies, reposts, and citations. Capital only condenses at one node: subscription fees.

A subscription is a clear hot signal, a fixed long-term recurring fee. However, it exists as a long-term contractual commitment, not a short-term real-time trade, and thus does not pollute the entire creative ecosystem with continuous pricing. You don't see real-time tradable stock prices for individual articles. The medium remains cool; capital is closed within the subscription loop.

Bandcamp for music platforms, Wikipedia for charitable donations, Patreon for creator empowerment – the same logic applies. These platforms instinctively identified the right capital condensation points, allowing capital to enter orderly without heating up the entire cool media ecosystem. They never force a price on every single social interaction, understanding a core principle: the underlying layer must retain its cool media properties for the platform to continue accumulating its unique appeal.

This is the core lesson SocialFi missed. Capital and cool media are not incompatible, but rules must be followed: capital must be localized, low-frequency, and appropriately illiquid, structurally isolated from the vast majority of social interactions. It can only condense at specific points, not flood the entire domain.

Once you attempt to assign asset value to every daily social interaction, you are effectively replacing the social medium entirely with a financial market. And financial markets can never generate the unique value of cool media – that ambiguous, open space for accumulation and co-creation through user participation.

Future Directions

A new batch of projects has already quietly internalized this logic, even if they don't explicitly use the hot/cool media theory. Following the same principles, they are beginning to form stable development paradigms: the foundation is social and cultural content, with value slowly accumulating and precipitating through user participation.

If one sentence could summarize the core lesson of SocialFi's failure, it would be: Liquidity Equals Heat.

Injecting comprehensive liquidity into a cool medium does not make it more efficient; it fundamentally changes the nature of the medium, causing it to lose its core value.

The truly worthwhile product directions for the future are never about "how to price every social interaction." Rather, the harder and more precise question is: How to find the exact point for capital condensation without destroying the underlying cool media ecosystem?

This area remains almost entirely unexplored. SocialFi rushed to break down all social interactions into market transactions, overlooking this crucial nuance. The next wave of projects that can truly achieve long-term sustainability will inevitably be those who truly understand McLuhan, respect the nature of cool media, and do not arbitrarily heat up the entire ecosystem.

NFTs: A More Typical Supporting Case

If SocialFi is a failed case of "born as hot media, but disguised as cold social media," then NFTs provide an even more profound warning: they witness how a classic cool media practice spanning centuries can be rapidly heated up and completely destroyed in a short time.

Collecting is one of humanity's oldest cool media behaviors. Browsing vinyl records, lingering in antique shops, trading cards during recess, displaying stamp collections offline… The collected object itself carries only half the value; the other half comes from human participation and identification, the slow accumulation over years, the stories behind the collection, and the shared resonance and exchange among fellow enthusiasts.

The value of collectibles is inherently ambiguous, context-dependent, and varies from person to person. This is not a flaw; it is precisely the core charm that distinguishes collecting as a cultural hobby from mere trading.

Early NFTs from 2020 to early 2021 retained this cool media trait: CryptoPunks were initially just a niche趣味玩法 within the crypto circle, with no clear price charts; their value stemmed from community cultural consensus, not from market quotes. Early Art Blocks works were similar.

Back then, there were dedicated forums and Discord communities where players shared stories about their collections, exchanged aesthetic insights, and co-built the culture of the circle. Collecting was a pure act of community participation; the meaning of collectibles needed to be co-granted by the community.

Then, trading platforms gradually matured, and the medium-heating process accelerated abruptly, reaching an extreme level worthy of a classic industry case study: OpenSea made floor prices fully public, rarity tools quantified every trait into a numeric score, real-time charts made every collection series look like a stock market index, sniping bots eliminated human reaction time, and wash trading became a status symbol.

Individually, these features seem like reasonable market optimizations. But collectively, they pushed collecting – this cool medium – into a hot medium at a historically unprecedented speed.

The outcome perfectly matched McLuhan's prognosis: Collectors turned into traders, traders devolved into operators of bots, and bots simplified the value of collectibles to a single floor price number. Once the price fell, all cultural connotations and community belonging vanished without a trace.

Early collection communities did not solidify into deeper cultural circles; instead, they dissipated instantly as the market turned. True collectors do not leave when prices drop; they continue to communicate, collect, and pursue their hobbies. The mass exodus from communities after the NFT crash precisely proves that there were never any true collectors within – only speculators disguised as players. When the market scene ended, the disguise faded away.

Compared to SocialFi, NFTs are a more acute media case study: SocialFi is a new track born on the hot media path; its failure could be attributed to its novelty and rampant speculation. NFTs, however, destroyed a mature cool media practice that had survived for