We should be wary of applications that rely too much on "DeFi".

Written by: Asher Zhang

Recently, friend.tech’s abandonment of contract control has caused heated discussions in the market. The team explained that this is not a runaway move. So is there still hope for friend.tech? Does the decline of friend.tech disprove SocialFi? Why is the decline of friend.tech expected? Where is the real hope for SocialFi?

friend.tech is essentially bankrupt and liquidated. SocialFi should pay more attention to the "Social" part

On September 8, the friend.tech team announced that it had set the Admin and ownership parameters to 0×000…000. As soon as the news came out, the price of the protocol token FRIEND fell by more than 20%. According to Coinmarketcap data, the FRIEND token had previously reached nearly $3 in May this year, a drop of 97%.

Why did the market react so strongly to friend.tech? This is because the friend.tech move means that the developers of the team have given up control of the smart contract, and there will be no more upgrades and improvements to the protocol in the future, which has caused the market to speculate that it has run away. However, the team later posted a statement saying: "The team has no plans to close or stop the friend.tech website application; the previous operation of giving up contract permissions was mainly to ensure that no future changes can be made to the smart contracts deployed on Base, which may increase or generate new fees; these operations will not affect the current functions of the friend.tech website application in any way, and everything users know and use remains unchanged."

Although the friend.tech team explained that "everything remains the same", from the data point of view, friend.tech is actually unsustainable. The Block data shows that since the end of May this year, friend.tech has less than 100 daily active users; on August 7, friend.tech had only 5 daily active users, including 3 independent buyers and 2 independent sellers, a record low. From the perspective of running a company, such operating data is difficult to survive, and once its team abandons any new updates, it is even more difficult to revive. Therefore, the author believes that friend.tech has essentially gone bankrupt and liquidated. In addition, the friend.tech team has also continuously transferred ETH to Coinbase, with a total of 19,477 pieces.

friend.tech was very popular at the time, and it focused more on the "Fi" part of SocialFi, using economic incentives to stimulate users to migrate quickly. However, the prosperity of friend.tech was mostly due to the freeloaders, who sent a large amount of spam to earn tokens, damaging the rights and interests of real users. In the end, the freeloaders ended up in despair after they had taken all the freeloaders.

Compared with friend.tech's competitor Farcaster, the decentralized social network protocol Farcaster focuses more on the "Social" part of SocialFi. For example, Meme tokens have been popular recently, and Farcaster's plug-in can reach users with these messages in a timely manner, which has led to more and more Meme projects starting to publish information through Farcaster. At the same time, a large number of users have also begun to flock to Farcaster to get the most timely news. At its peak in July this year, Farcaster had more than 100,000 daily active users, and even now it still maintains 70,000 daily active users.

Farcaster's success story is expected to carry the banner of SocialFi

Although the failure of friend.tech has disappointed the market with SocialFi, there is no need to be too pessimistic about this track. The failure of friend.tech is actually very common in the crypto market. Their commonality is that they rely too much on the stimulation of the crypto-economic mechanism. With the withdrawal of the wool party, it is difficult to maintain the false prosperity. Not only SocialFi, but also many previous projects such as GameFi are like this. For investors, they should be wary of applications that rely too much on "DeFi". In the future, projects that can truly provide practical functions will go further, and Farcaster is expected to carry the banner of SocialFi.

From the above, we can see that Farcaster pays more attention to the "Social" part, and can develop targeted application plug-ins based on the changes in the crypto market and the needs of users, so as to further capture real users. This strategy is currently very successful. In fact, Farcaster has been very pragmatic from the beginning.

Farcaster's two founders, Dan and Varun, have both held important positions at Coinbase and have rich resources in the crypto market. In the early testing phase, founder Dan used his personal influence and connections to invite many well-known OGs, including Vitalik Buterin, to join the platform. At the same time, he screened early users by obtaining invitation codes through Twitter private messages, which made Farcaster's user group have a very high "elite" concentration. Last October, Farcaster opened registration, but still set a $5 entry threshold. This move effectively blocked the registration of a large number of robot accounts and maintained the overall good atmosphere of Farcaster, which was in sharp contrast to Nostr, which had declined due to the proliferation of robots.

Farcaster founder Dan also developed a Warpcast application based on the Farcaster protocol, which currently accounts for 90% of the Farcaster protocol traffic. The overall architecture of Warpcast is similar to the traditional Web2 social software Twitter. Users can post tweets (casts), comment, forward, and follow other users. In addition to social media functions similar to Twitter, Warpcast also introduced functions such as channels and actions, which derive more ways of interaction. For example, DEGEN uses the user participation in the Farcaster ecosystem to distribute tokens. Users can participate in DEGEN's airdrops by following channels and interacting. The airdropped tokens can be given to other users as rewards.

In addition, Farcaster's huge growth this year is closely related to the Frames feature launched in February. Frames is a mini-app embedded in Warpcast, which allows users to interact in a more diverse way without leaving Warpcast, such as minting NFTs, subscribing to content, playing mini-games, and receiving tokens. For example, far.cards is a trading card project developed based on mint.club and is exclusive to Farcaster users. The attribute value of each user's card depends on their activity on Farcaster, such as the number of fans, likes and replies received, etc. The price of the card is determined by the bonding curve, and the purchased cards can be collected or traded.

Overall, the Farcaster team is indeed a team that does things in the SocialFi track. It pays more attention to the social needs of users and can carry out targeted development and design according to the characteristics of the crypto market. This is undoubtedly the key to its future success. In May, Farcaster's developer Merkle Manufactory announced the completion of a new round of financing, led by Paradigm, with a total of US$150 million, raising the company's valuation to US$1 billion. This also represents the recognition of Farcaster by the institution.

What is the real pain point of SocialFi's development? Farcaster's overlooked potential value

In fact, the real feature of SocialFi's development is still the crypto adoption problem. Simply put, the main users of the current crypto market are still in centralized trading scenarios, and there are still not many users using decentralized applications and tools. The author believes that on the one hand, the fraud problem is indeed very serious. Although many projects want to do things seriously at the beginning, too many projects run away, and only a few projects can persist in the end. This has created the impression that there are many scams in the crypto market, and users need a process of credit establishment. Traditional industries can be regulated, but the decentralization of the crypto industry makes the risk of doing evil very low, which makes ordinary users unable or dare not accept it. In addition, the threshold for using crypto applications is still high, which is not friendly to ordinary novices. This is also what Ethereum's next upgrade focuses on solving. In addition, the author believes that another very important issue is that the value created by the blockchain industry itself is still relatively limited, which makes speculation (wool pulling, etc.) still the mainstream at present, and there is no widespread real application demand.

The author still believes that the current development of the blockchain industry is in its early stages, and Web3 will still come in the future, which means that users will come in sooner or later. Under this assumption, Farcaster has a potential value that is worth noting. The founder of Farcaster was previously a senior executive of Coinbase. Farcaster is closely linked to the Base ecosystem, and Jesse, the core person in charge of the Base chain, is very active on Farcaster. Among the top 500 users with the most fans on Farcaster, more than 70% of the on-chain interactions occur on the Base chain. And Base is strongly supported by Coinbase, which is connected to the traditional financial market, which is very conducive to the future development of Farcaster.