Author of the article: Anderl

Article compiled by: Block unicorn

Introduction

As a writer, I have been pleasantly surprised by the development of Substack in the past few years. What has really made me stay is less about what it has done and more about what it has not done. Substack does not flood my screen with various interaction metrics or algorithmic noise, nor does it turn every interaction into a performance. Every time I open it, I see a blank writing space, where I can discover people with similar or opposing views, as well as communities I want to engage with or avoid. In this era of short content and shorter life cycles, platforms like Substack have chosen a gradual path to build trust between creators and readers.

This restraint is quite rare across most social networks. When you take a step back and examine other platforms, this phenomenon becomes even more apparent.

I have found that most social media platforms are suffocated by various metrics, such as likes, shares, views, and promotional replies. All these factors collectively determine the content you see in your feed. The platform has already decided the meaning of the content, so you have no right to make any decisions. You are no longer participating; you are performing instead. Ultimately, excessive optimization will consume the medium itself.

In today’s article, Anderl makes similar points and presents more appropriate examples. He uses McLuhan's theory framework of “hot media and cool media” to explain why SocialFi collapsed, why NFT culture has died, and why truly successful platforms understand how to bring in funding without being controlled by it.

Media

A sentence written by McLuhan in 1964 has been quoted so often that it has lost much of its original meaning: “The medium is the message.” Today, this phrase sounds like a slogan printed on tote bags. But if you stop and interpret it as an effective diagnostic tool rather than a catchy phrase, it becomes very useful, especially for those trying to understand why many recent attempts to merge social networks and finance have ended in slow failure.

McLuhan’s actual argument is much narrower and more peculiar than what the slogan suggests. He believed that every medium reshapes the people who use it; this reshaping does not happen through content delivered by the medium but through the form of the signals it conveys. A medium that transmits complete, high-resolution signals turns users into receivers. A medium that transmits incomplete, low-resolution signals forces users to fill the gaps, during which they become participants. He referred to the former as "hot" and the latter as "cool".

Print is popular because the content on the page is completely written. Broadcasting is popular because the broadcast content is fully produced. Lectures are popular because speakers can control information. In contrast, phone calls are unpopular because the information conveyed by sound alone is too little, and listeners must construct the missing context themselves. Cartoons are unpopular because the brain can complete the drawing. In McLuhan's analysis, television is unpopular because the early signals had too low a resolution, requiring viewers to actively reconstruct while watching. He made a controversial claim that this is precisely why television is more addictive than film.

What matters here is not the outdated specific examples but the argument behind them. The temperature of the media determines what kind of behavior it generates. Hot media fosters consumption, while cool media encourages participation. Moreover, it is crucial for the upcoming discussion that one cannot convert one medium into another without changing the essence of the medium.

What does this have to do with social networks?

In McLuhan’s words, most social media today are “cool.” A tweet is a fragment. A photo without context is a fragment. A “like” is also a fragment. None of these are complete signals. Their meaning only emerges through others’ participation, responses, reshares, discussions, and connections. A post without interaction is practically nothing. A post with two thousand responses becomes something completely different, even if its original content remains unchanged. This is exactly the hallmark of a “cool” medium as described by McLuhan: a work is incomplete upon arrival and must be completed through use.

This also explains why social networks feel like this: they are not content distribution systems, but participation engines that only superficially resemble content. Platforms that understand this have thrived even if they have never read McLuhan's theory. In contrast, most platforms that attempt to professionalize the participation process and provide finished information to passive consumers have ultimately become marginalized.

Interestingly, what happens when someone tries to add an economic element to a great medium? SocialFi emerged in this context.

What is SocialFi trying to do?

The vision of SocialFi looks very good on paper. Its argument is that social capital is real economic value. People constantly create social capital, but platforms seize all of it. If we can push social behavior directly into the market, then those who truly create value can profit from it. Every follow becomes an equity stake, every post becomes a tradable asset, and every interaction has its price. In theory, a platform will eventually form that is both a social network and an economic entity, where reputation can be traded, and creators can be rewarded in real time for the attention they generate.

In the last few weeks of 2023, the emergence of Friend.tech made this model seem like it would truly become an emerging field. People were buying and selling each other's keys. Some influential people could even sell tokens with starting bids in the thousands of dollars. Its interface looked like a social network, while its operation resembled a securities account. Other projects also quickly emerged, each promising to achieve the same logic in slightly different ways. Stamps, chat rooms that require registration to access, social tokens, attention markets, and on-chain creator economies flooded the project brochures.

Then the entire field collapsed. Friend.tech faded into obscurity. Most subsequent projects failed to make any breakthrough. Token prices plummeted and have never recovered. By 2024, SocialFi had become a slightly embarrassing term that founders avoided mentioning in their presentations.

The standard explanation is that this was a speculative cycle, where people participated to profit, and left once the profits ceased. While this statement is not wrong, it is superficial. The speculative cycle does not explain why participation plummeted. People did not just stop trading keys; they also stopped posting, reading, and engaging. Social activities, just like financial activities, disappeared. Why did this happen?

McLuhan's Interpretation

A deeper analysis suggests that SocialFi’s failure did not stem from speculation. Speculation is merely the surface; it is not the root cause. The problem lies in the fact that the entire social network industry is built on a misreading of its own medium.

Social networks are a type of cool medium. Their value lies in the participation itself, which constitutes a signal, and meaning accumulates through repeated, low-resolution behaviors whose significance only becomes apparent over time. SocialFi borrowed from this medium but replaced its constitutive signal—social behavior—with a high-resolution signal—price.

When you assign a real-time, visible, tradable price to “follows” or posts, you are not adding an economic layer to social media; you are fundamentally changing the medium itself. The new product becomes a completely clear signal, leaving no gaps to be filled. “Follows” no longer have any ambiguity; they represent a specific amount at that moment. Once the signal is so clear, the rational response is no longer participation but allocation.

This is why Friend.tech is not, from its internal logic, a social network. It resembles a micro-reputation Bloomberg terminal, cloaked in the guise of a social network. Users are not disseminating information; they are trading. The trading happens in terms of each other's identities, but this does not lend the activity social attributes; it categorizes it as a financial activity dressed in social clothing. Once the financial dynamics shift (prices stop rising, obvious arbitrage opportunities disappear, speculative profits decline), there is no underlying social medium to rely on anymore. The social element was swallowed by the financial layer right from its inception.

This is precisely what McLuhan predicted. Hot signals and cool media cannot coexist; they displace each other. If one of the attributes of an action is its current market price, updated in real-time and visible to everyone, then it is impossible to have a one-sided, vague, participation-driven action. Price wins. It always wins because it is clearer than any other information on the screen.

The early designers of SocialFi thought they were building a social network with economic functions at its core. But in reality, they constructed a market disguised as a social entity. The failure of this field did not stem from excessive speculation but because it quietly became a hot medium while still being marketed as a “cool” medium.

Why is this more than just about cryptocurrency?

It is easy for people to interpret this article as an in-depth analysis of a niche product category. But the same logic applies to a broader field; it explains a pattern in the history of platform development that can be traced back decades.

Cool media dies when it becomes overheated. This is not a metaphor but a recurring failure pattern. Platforms that initially served merely as low-resolution participation engines often add various features over time to increase their resolution. For instance, verified accounts, publicly visible interaction metrics, pay-per-view creator funds, and algorithmic rankings that can precisely display post performance. These new features seem harmless, even beneficial. But overall, they depict a slow thermal drift from cool to hot. The medium becomes clearer, the signals more defined, and ultimately, users shift from participation to performance, from performance to consumption of performance metrics, and then gradually exit entirely, as there are no gaps left to fill.

This is why platforms that seemed unstoppable during peak user engagement periods often become hollow and dull a few years later. They have moved away from areas that truly create value. Twitter around 2012 was cool, whereas Twitter around 2024 mostly just feels popular. This transition is not the fault of any individual; it is the result of the collective natural selection of all metrics, all profit models, and all product teams aiming to enhance signal clarity. Popularity is the manifestation of optimizing a medium that doesn’t need optimization.

SocialFi rapidly replicated the same trend, compressing a decade's worth of time into just a few months. It started with the hottest signal—real-time market prices—skipping the entire cooling phase in which media initially gains influence. It had no factors to escape from. It was extraordinarily popular from day one, but it also quickly faded because media without a protective moat of dissemination will soon perish.

The Solution: Condensation Point

If we accept this diagnosis, an obvious question arises: does this mean that any attempts to merge social participation with capital are doomed to fail?

No, because there is a third option that early social finance completely overlooked. You can keep the medium cool and let capital cluster at specific points within the medium, rather than dissolving capital into the medium itself.

This metaphor draws from physics. In a fluid that primarily exists in a gaseous state, there are specific local conditions under which droplets form. Droplets are not gas, nor is gas droplets. The two coexist, and it is interesting to observe the geometry of the condensation zone. Most of the medium remains in its original state, while a few points become dense, liquid, and capable of bearing loads.

The functioning of cool media is similar. Its underlying substrate maintains a “cool” state. Most behaviors in the media remain low-resolution, vague, and reliant on participation. But at certain moments, capital can coalesce from the social substrate to become a real, economically grounded, and impactful entity. The key is that these condensation points are not the medium itself, but are segments that are locally reinforced within the medium. Other parts of the media remain unchanged.

I believe this is the correct way to interpret certain platforms that continued to operate quietly when SocialFi failed. Substack is a fantastic writing platform. Writing itself is fragmented, ongoing, cumulative, and is perfected by readers through replies, reshares, and citations. Capital concentrates at a specific point: regular subscriptions. This subscription is a hot signal, a clear regular price, but its structure is a long-term commitment rather than a spot trade, meaning it does not pollute other parts of the platform with continuous price discovery. You will not see a real-time tradable price for a single article. The platform remains cool, and capital concentrates at the subscription point.

Bandcamp applies the same approach to music. Wikipedia achieves this through donations rather than charging per edit. Patreon provides support for creators. These platforms have cleverly found critical points where capital can enter without heating up the entire medium. They have not attempted to price every social behavior. They all understand that only by keeping the platform “cool” can it continue to generate attraction.

The lesson SocialFi missed is that capital and cool media can coexist, provided specific conditions are met. Capital must be localized, infrequent, should maintain appropriate liquidity, and structurally be separated from most social behaviors. It must act to condense rather than saturate. Once you attempt to monetize every action, you replace social media with economics. And economics cannot produce the continuously accumulating, ambiguous meanings driven by participation that cool media generates.

What will happen next?

A generation of projects has quietly mapped out this model, although they typically do not label it with these terms, and this model is gradually stabilizing. They often share some common features. Their foundational layer is a social or cultural product whose meaning accumulates through participation.

If I had to summarize the lesson of the collapse of SocialFi in one sentence, it might be this: liquidity is heat. Adding it to a cool medium does not enhance the medium's efficiency; instead, it alters the medium, rendering it incapable of fulfilling its original function.

Therefore, the truly interesting design space is not how to price every social behavior, but the more difficult, more specific question: how to allow capital to condense within this mechanism without disturbing some stable mechanism. Almost no one has asked this question. SocialFi failed to pose it because it was busy integrating everything into the market. The next wave of truly effective trends may come from those who take McLuhan’s theory seriously and preserve the characteristics of the medium as much as possible.

A More Typical Case of NFTs

If SocialFi demonstrates what happens when you create a hot medium and call it a social medium, then NFTs reveal a more enlightening side. They showcase what occurs when you heat up a medium that has existed in a very cool state for centuries, in real-time.

Collecting is one of the oldest forms of “cool” media. Whether it is browsing through stacks of records, wandering through antique shops, trading Pokémon cards on the school playground, or showcasing stamps at club parties, the items themselves carry only half the meaning. The other half comes from participation, recognition, the slow accumulation over the years, the stories associated with specific collections, and the discoveries made while sharing with others. The value of collections is low-resolution, vague, and reliant on context. But this is not a flaw. It is precisely this mechanism that makes collecting a cultural practice rather than a simple transaction.

The early wave of NFTs in late 2020 and early 2021 still retained similar logic. CryptoPunks were initially a joke among cryptocurrency insiders, vague in meaning, and their value arose more from shared culture than price. Early releases from Art Blocks had similar characteristics. There were forums, Discord channels, where people discussed individual works, shared stories, and built communities. Collecting itself was fun, but the works were incomplete and required engagement to generate meaning.

Then the market matured, and a shift to heat began, deep enough to warrant its own case study. OpenSea made floor prices visible. Rarity tools quantified each feature into numerical scores. Real-time charts made every collectible series resemble stock prices. Sniping bots rendered human reaction speed irrelevant. False trading volumes became a symbol of status. Each of these features, when viewed in isolation, is a reasonable market optimization. However, they acted together to catapult the medium from a cool to a hot market at an unprecedented speed.

The results almost strikingly align with McLuhan’s predictions. Collectors became traders, and traders became bot operators. Bot operators reduced the meaning of collectibles to a floor price; once that floor price fell, everything disappeared. The communities that formed around early collectibles did not evolve into richer cultural forms; instead, they dissipated the moment the market ceased to fluctuate. This was not the behavior of true collectors. Collectors would stay during price declines; they would continue to engage, trade, and maintain their collections. What the NFT community experienced after the collapse was not a mass exodus of collectors but proof that true collectors had ceased to exist. What remained were market participants disguised as collectors, and when the market closed, their disguises were shed.

This illustrates the media theory topic even more vividly than SocialFi. SocialFi was an emerging medium that became a sensation upon its introduction. Therefore, its failure may be blamed on the novelty or speculative cycle. NFTs, however, leveraged a medium that had operated effectively for centuries, enduring wars, technological revolutions, and shifts in trends, and within a mere thirty months, destroyed its operational mechanisms. This medium had previously worked well; it was the platform that destroyed it—not through negligence but through relentless optimization. Each step made the experience more precise, measurable, and efficient. But it also slightly diminished the value of collections until, at some point, nothing remained to be collected.

It is worth noting that thermal drift does not occur slowly. It can happen in product cycles, especially when the platform layer is built by those who fail to realize they are in a “cool environment.” They can’t help but add new metrics, leaderboards, and real-time price information. Each addition slightly raises the temperature of the platform, which may seem harmless in isolation. But cumulatively, it can ultimately cause the modes of practice that the platform was supposed to support to vanish entirely.