Why pricing social interactions is destined to fail?

Original Author: Anderl

Original Translation: Saoirse, Foresight News

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

Substack doesn't clutter your page with endless engagement metrics or algorithmic feeds, nor does it turn every interaction into a staged performance. Each time you open the interface, you find a clean, pure space for creation. You can connect with creators who share or challenge your views, and find communities you want to engage with or can choose to ignore. In an era flooded with short-form content and ever-shortening lifecycles, Substack has chosen a slow lane, gradually building trust-based connections between creators and readers.

This sense of restraint is extremely rare on most social networks today. You'll see this more clearly once you step outside your usual perspective and look at other platforms.

Most social platforms today feel oppressive: pages are plastered with metrics like likes, reposts, play counts, pinned replies, and more. These indicators collectively determine what content appears in your feed. The platform has already defined the entire value of the content, leaving users with little room for their own interpretation. Users have gradually transformed from participants into spectators of a performance. When a platform excessively pursues data optimization and piles up metrics, the medium itself slowly spirals into self-consumption.

In this article, the author delves deeply into this viewpoint and provides more fitting examples. Using McLuhan’s theory of hot and cold media, he explains three things: why SocialFi collectively collapsed, why NFT culture quietly dissipated, and how those truly sustainable platforms manage to strike the right balance—allowing capital to enter without letting it consume the entire ecosystem.

Now, let's dive into the main text.

In 1964, McLuhan wrote a phrase so often repeated that it has lost its original depth: "The medium is the message."

Today, this phrase seems like a trendy slogan printed on canvas tote bags. However, if we move beyond clichéd interpretations and use it as a practical analytical framework, we find it immensely valuable. It is particularly useful for understanding why, in recent years, every attempt to deeply integrate social networks with finance has ultimately led to failure.

McLuhan's actual insight is more specific and profound than the common stereotype suggests: every medium reshapes its users. This change is not due to the content the medium conveys, but to the form of the signal it emits.

A medium that transmits complete, highly definitive signals turns its users into passive receivers. Conversely, a medium that can only transmit fragmented, informationally incomplete signals forces users to actively fill in the gaps, turning them into active participants in the process.

McLuhan defined the former as "hot media" and the latter as "cool media."

Print is a hot medium—the content on the page is already finalized. Radio is a hot medium—the program is pre-produced. A live lecture is a hot medium—the speaker has complete control over the information output.

In contrast, cool media include: a phone call is a cool medium—relying only on limited voice information, the listener must mentally fill in the context. A cartoon is a cool medium—the images have gaps that require the viewer's brain to complete the visual details. In McLuhan's analysis, early television was also a cool medium—its resolution was very low, requiring viewers to constantly and actively reconstruct the image. He even controversially suggested this is why TV is more addictive than film.

We don't need to dwell on these somewhat dated examples. The core logic is key: the hot or cold nature of a medium determines the user's behavior pattern.

Hot media foster passive consumption; cool media foster active participation. Most crucially, hot and cold media cannot be forcibly converted into one another. If deliberately tampered with, the essential nature of the medium is completely altered.

What does this have to do with social networks?

Using McLuhan's theory: most of what we now call social media are, in essence, cool media.

A single tweet, a photo posted without context, a 'like'—these are all fragmented pieces of information, not complete signals in themselves. Their meaning is only formed through the participation, replies, shares, and interconnected conversations of others. A post with zero interaction holds almost no value; yet a post garnering two thousand replies can spawn entirely new meanings, even if the original text remains unchanged. This is a classic characteristic of cool media: the content itself is incomplete; its value needs to be supplemented and given meaning through user participation and interaction.

This also defines the underlying logic of social networks: they are never just tools for content distribution, but engagement engines centered on participation, merely disguised as content platforms.

Platforms that understood this, even if they never studied McLuhan, have thrived. Conversely, those that tried to professionalize participation, push finalized complete content to users, and turn them into passive receivers, have gradually been pushed to the margins.

Interestingly, problems arise when people try to overlay an economic and financial logic onto social platforms that are inherently cool media—this is the context for the emergence of SocialFi.

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 platforms reap all the profits.

If social interactions could be directly integrated into a market trading system, then the ordinary people creating the value could capture their own returns. Every follow relationship becomes a share of equity, every post becomes a tradable asset, and every social connection is given a price tag.

Theoretically, this would form a social network with its own built-in economic system: personal reputation has a market price, and creators can capture real-time attention-based income.

In late 2023, with the explosion of Friend.tech, this logic seemed to be on the verge of realization. People were buying and selling social keys, and the initial prices for influencer accounts were thousands of dollars. The interface looked like a social network, but its internal operation was indistinguishable from a securities trading account.

Soon, a wave of similar projects emerged, all with similar mechanics: social stamps, private communities, social tokens, attention trading markets, on-chain creator economies… The air was thick with business plans.

But quickly, the entire sector came crashing down.

Friend.tech's hype faded, and subsequent copycat projects failed to scale. Token prices plummeted with no signs of recovery. By 2024, "SocialFi" had become an awkward term within the industry, a project founders would avoid mentioning during their pitches.

The mainstream explanation was that it was just a speculative cycle: people came for profit and left when there was none to be made.

This statement isn't wrong, but it's too superficial. The speculative cycle cannot explain why the underlying social engagement collapsed entirely: people didn't just stop trading keys; they stopped posting, browsing, and being active. As the financial frenzy subsided, the social ecosystem died completely.

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 was a symptom, not the cause. From its inception, the entire sector was built on a fatal misunderstanding of its own media nature.

Social networks are inherently cool media: their value derives from users participating to complete the meaning of signals. Social interactions are fragmented and ambiguous, accumulating value over time through sedimentation. SocialFi's approach, however, was to directly replace the underlying social signals with a highly deterministic one: the real-time price.

When you attach a visible, real-time, freely tradeable price tag to a follow or a post, you are not simply adding an economic layer to a social medium; you are directly replacing the medium itself. A once ambiguous social interaction becomes a completely finalized, unambiguous financial signal: a follow no longer represents social connection or affinity, but simply equates to a specific dollar value at that moment.

Once the signal is fully finalized, the user's rational behavior is no longer engagement but portfolio allocation and profit-seeking.

This also explains Friend.tech's true nature: it wasn't a social network at its core, but a micro-personal reputation quote terminal disguised as a social interface. Users seemed to be posting and socializing, but were engaged in a game of trading all along. The social vocabulary was just a facade; the core was purely financial behavior.

Once the financial market turned—prices stopped rising, arbitrage opportunities vanished, speculative gains dropped—there was no underlying native social ecosystem to support it. From the moment it was born, the financial attribute had already devoured the social aspect.

This is the outcome preordained by McLuhan's theory: a hot signal cannot coexist with a cool medium; it will simply replace it.

When an ambiguous, open social behavior requiring participatory interpretation simultaneously carries a universally visible, real-time market price, the price will always dominate—because it is the most deterministic and unambiguous signal on the page.

The early SocialFi designers' mistake was thinking they were building "a social foundation with an economic layer," when in reality, they were creating "a financial market with a social skin."

The sector's collapse wasn't due to excessive speculation, but because the platform had already quietly transformed from a cool medium into a hot medium, while still masquerading as a social network with cool media properties.

This Logic Applies More Broadly, Not Just in Crypto

Don't see this merely as a post-mortem for a niche product sector. This logic is universal and can also explain common dilemmas in platform development over decades.

Once a cool medium becomes overly hot, it will die. This is not a metaphor but a recurring pattern of failure.

Many platforms start as cool media with low information density and a core focus on participation. However, they continuously add features that step-by-step increase information certainty: verified account badges, public full engagement data, creator funds based on view counts, precise algorithmic ranking... Individually, these features might seem harmless or even enhance the experience. Collectively, however, they cause the platform to drift slowly from cool to hot.

The media signal becomes more finalized and standardized. User mentality shifts from participatory creation to deliberate performance. They then become obsessed with data metrics and eventually churn entirely—because there is no more open space left for users' own interpretation and creative participation.

This is why many platforms that seemed irreplaceable at their peak become hollow and weak just a few years later: they discarded the very cool media properties that created their value.

Twitter around 2012 was a quintessential cool medium; Twitter today has long since become a hot medium.

This property drift is not caused by a specific entity but is a natural tendency of all data metrics, commercialization, and product optimization: the pursuit of precision, quantifiability, and efficiency is inherently equivalent to "heating up" a cool medium—and such media were never meant to be over-optimized.

SocialFi compressed this decades-long, slow drift into a rapid evolution lasting just a few months. It was equipped with the hottest signal—real-time market pricing—from its inception, completely skipping the necessary stage of ecological accumulation for a cool medium. Lacking a foundation of native social interaction, it was born a hot medium. And a hot medium without a traffic moat is destined to perish extremely quickly.

The Path Forward: Capital Condensation Points

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

The answer is no. There is another path completely ignored by early SocialFi: preserve the overall cool media nature of the medium, allowing capital to condense and settle only at specific nodes, rather than permeating every single social interaction.

The inspiration comes from a physical phenomenon: a fluid remains in its gaseous state overall, condensing into liquid droplets only under specific local conditions. The droplets are not the gas, and the gas isn't changed by the droplets. The key to their coexistence lies in controlling where and how the condensation occurs.

Cool media platforms can follow the same logic. The underlying layer maintains its cool media properties: the vast majority of social interactions remain fragmented, ambiguous, and reliant on user participation for co-creation. Capital is allowed to condense and form fixed, financially valuable touchpoints only at predetermined, specific nodes.

The crucial point is: these capital touchpoints are local intensifications within the medium, not the medium itself. The rest of the ecosystem remains completely in its native state.

The platforms that have quietly built successful models, far surpassing SocialFi, deeply understand this. Substack is a cool medium for written creation—content is fragmented and continuously updated, its value completed by readers' replies, shares, and citations. Capital condenses only at the single node of subscription payments.

A subscription is a clear hot signal (a fixed, recurring fee), but it exists as a long-term contract, not a real-time short-term trade. It doesn't pollute the entire creation ecosystem with continuous pricing. You don't see a real-time, tradeable stock price for a single article. The medium maintains its cool nature; capital is closed within the subscription loop.

The same logic applies to Bandcamp for music, Wikipedia for charitable donations, and Patreon for creator empowerment. These platforms have instinctively found the right condensation points for capital, allowing it in an orderly fashion without heating up the entire cool media ecosystem. They never force a price on every single social interaction, understanding a core principle: the foundation must retain its cool media properties for the platform to continuously attract and retain value.

This is the key insight SocialFi missed. Capital and cool media can be compatible, 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 ecosystem.

Once you try to assign asset value to every daily social interaction, you've effectively replaced the social medium itself with a financial market. And a financial market can never generate the unique value of a cool medium—its ambiguity, the potential for sedimentation and accumulation, the value built through user participation and co-creation.

Future Directions

A new wave of projects has already quietly grasped this logic. Even if they don't explicitly articulate the theory of hot and cold media, they follow the same principles and are forming a stable development paradigm: the foundation is social and cultural content, with value slowly accumulating and settling through user participation.

If one were to summarize the core lesson of SocialFi's collapse, it would be this: liquidity equals heat.

Injecting liquidity across the entire ecosystem of a cool medium doesn't make it more efficient; it fundamentally changes the medium's nature, causing it to lose its core value.

The truly worthwhile product direction for the future is never "how to price every social interaction." It is a harder, more precise question: how to find the exact points for capital condensation without destroying the underlying cool media ecosystem.

This field remains largely unexplored. SocialFi was too busy deconstructing all social behaviors into market transactions, missing the most critical matter of proportion. The next generation of truly sustainable projects will be those that truly understand McLuhan, respect the nature of cool media, and resist the temptation to indiscriminately heat up the entire ecosystem.

NFT: A More Typical Corroborating Case

If SocialFi is a failure case of "inherently hot media masquerading as cool social media," then NFTs provide an even more profound warning: they witnessed a classic cool media practice spanning centuries being rapidly heated up and completely destroyed in a short time.

Collecting is one of humanity's oldest cool media behaviors. Browsing vinyl record shops, lingering in antique stores, trading cards during school breaks, displaying stamp collections offline... The object being collected carries only half its value. The other half originates from personal participation and identification, gradual accumulation over the years, the stories behind the items, and the shared resonance and communication among fellow enthusiasts.

The value of collectibles is inherently ambiguous, context-dependent, and subjective. This is not a flaw; it's the core charm of collecting, the very thing that distinguishes it from mere trading.

Early NFTs from 2020 to early 2021 retained this cool media characteristic. CryptoPunks initially started as a niche, playful pastime within the crypto community. They had no explicit price quotes; their value stemmed from community cultural consensus, not order book prices. The same was true for early Art Blocks generative art pieces.

At the time, there were dedicated forums and Discord communities. Players talked about the stories behind their pieces, shared aesthetic insights, and co-built the culture of their niche. Collecting was a pure community participation behavior, the meaning of which needed to be co-created by the community.

Then, trading platforms gradually matured, and the "heating up" of the medium accelerated dramatically, becoming an extreme classic case for the industry. OpenSea made floor prices universally visible. Rarity tools quantified every trait into a numerical score. Real-time price charts made every collection series look like a stock market index. Sniper bots eliminated the human reaction time. Wash trading became a status symbol.

Individually, these features seem like reasonable market optimizations. Collectively, they pushed the cool medium of collecting towards being a hot medium at an unprecedented rate in history.

The outcome perfectly matched McLuhan's prediction: collectors became traders, traders became bot operators, and the bot simplified the value of the collectible to a single floor price number. Once the price dropped, all the cultural significance and community belonging vanished.

The early collector communities didn't crystallize into deeper cultural circles. Instead, they dissipated instantly as the market cooled. True collectors don't leave when prices fall; they continue to communicate, collect, and pursue their passion. The mass exodus after the NFT crash proves that there were no true collectors to begin with, only speculators disguised as players. When the party ended, the disguise was shed.

Compared to SocialFi, NFTs are a sharper media case study. SocialFi was a brand new sector that followed