Introduction
According to the Global Social Market Report 2024, the social media industry has experienced significant expansion, and its market value is expected to grow from US$219.06 billion in 2023 to US$251.45 billion in 2024, representing a compound annual growth rate of 14.8%. About 62.3% of the worldâs population uses social media, with an average usage time of more than two hours a day.
Source: Smart Insights
Decentralized Social Media (DeSoc) offers a fresh perspective by revolutionizing the way creators monetize their content and manage online relationships. It promises to improve privacy, security, and most importantly, give creators full control over their data and its monetization.
While the concept of decentralized social networking is not new, it has only started to gain significant traction in 2023 as the adoption of Web3 technologies evolves. Introducing Friend.tech, a decentralized blockchain-based social network designed to tap into this emerging market. The platform differentiates itself by addressing common issues found in centralized networks, such as corporate ownership of user data, limited privacy options, and the risk of content censorship.
In 2023, Friend.tech has not only achieved significant growth, but also generated revenues that rival some of the top protocols, providing creators with the freedom to monetize their work on their own terms.
Source: DuneAnalytics
In todayâs article, weâll take a deep dive into the platform, examine its controversial token launch, compare it to its competitors, and assess its potential and associated risks for 2024.
We have covered Friend.tech before in 2023. You can read the full article here.
Project Overview
Friend.tech is a decentralized social platform built on the second-layer network "Base Chain" launched by Coinbase. It is closely integrated with X to obtain the user's Web2 identity, which allows users to potentially profit based on this identity. On this platform, each user can be tokenized and their influence can be directly priced by the market.
It is one of the most successful Web3 dApps in SocialFi, achieving the highest revenue to net deposit ratio ever, with over $2 million in revenue and $33 million in net deposits within the first month.
The core of the project is based on the concept of fan economy. To get started, users need an invitation code/invite and deposit 0.01 ETH, which is the main currency for purchasing shares of other users within the app. These shares represent a portion of the user's influence. When someone buys a share, they gain the ability to start a one-on-one chat with the person they invested in. This setup allows users to connect directly and personally with their favorite influencers. In addition, this ticket chat through these tokens called "keys" or "shares" can be traded, allowing users to potentially profit from the growing popularity of content creators.
For KOLs, they earn 5% every time someone buys or sells their shares (Key), and there are also financial incentives. In order to increase their income, KOLs need to increase their Key trading activities. Another 5% goes to friend.tech's finance department, and a total of 10% is charged for each buy and sell related transaction.
As we've already noted, the decentralized social media protocol attracted significant attention last year but has experienced a decline of late.
Source: Dune Analytics
On-chain data shows Friend.techâs daily activity has dropped significantly since its peak on September 13, with 539,810 transactions recorded that day. Since then, interest in the platform has apparently waned.
However, despite this decline and some criticism, there is a buzz among Friend.tech users about a potential resurgence. This excitement is driven by anticipation for the upcoming airdrop, the announcement that users will have full control over their tokens, and the upcoming version 2 release, which has been met with a positive response from the community.
Letâs take a closer look at the differences between Friend Tech V1 and its updated version V2.
Friend Tech V1 Introduction:
Friend Tech V1 is an innovative decentralized social platform that connects crypto influencers with their followers. The platform gained a lot of attention by enabling users to potentially profit by buying and selling KOL's "Key" by creating their own Key. This model was particularly popular during the bear market, helping the platform see a large growth in users and activity. The platform generated approximately $13 million in fees from a high trading volume of $130 million and paid out approximately $6 million in revenue to its users.
However, this model has its drawbacks, primarily because of the high fees involved. With a 10% fee for both buying and selling shares, it is difficult for users to make a profit unless they sell their shares at a price significantly higher than the purchase price. This need for high turnover to achieve a profit leads to an inconsistent user experience and ultimately becomes a barrier for new users to join the platform.
Friend Tech V2 Introduction and Uniqueness:
Friend Tech V2 was released on March 3, 2024, introducing several new features and changes. Notably, users can now get their $FRIEND tokens back, marking an important update. However, the release was criticized for a lack of clear information and guidance, especially regarding new elements like "Club".
Clubs are a major addition in V2, acting as group spaces owned and managed by Key holders. Clubs have their own governance, including voting for a chairperson who manages the club and appoints moderators. All transactions within the club use $FRIEND tokens, and each transaction incurs a 1.5% fee. This opens up the possibility of introducing referral fees and more flexible trading terms between club members.
However, the implementation process and user experience are not smooth enough. Users are confused about how to claim their airdrops, join a club, or even find a club they have set up, as the platform does not provide clear instructions or interface prompts.
In summary, V1 focuses on rapid growth and revenue through high fees, while V2 aims to enhance user governance and interaction through clubs, but faces challenges in execution and clarity, which may affect its long-term viability.
Team, infrastructure support and strategic partners
Friend.Tech was developed in August 2023 by two anonymous individuals with a controversial history in the crypto community, 0xRacerAlt and shrimppepe. On Platform X, members noted that these developers were also involved in an unsuccessful NFT project. Further review by Kalland revealed that 0xRacerAlt had deleted several tweets linking to this NFT project and had an official position in the Kosetto Discord. These findings raise concerns about their reliability and the possibility of similar issues associated with Friend.Tech.
In August 2023, Friend.tech received an undisclosed amount of seed funding from Paradigm and partnered with the venture capital firm to create online social interaction tools.
Rumors on X also indicated that Friend.tech completed its Series A funding round at a $50 million valuation. This round included token certification, hinting at the possibility of them eventually issuing their own token, which did happen.
dispute
Friend.tech originated from a developer named Racer, who initially implemented it in TweetDAO, a decentralized social media project. The platform allowed users to post tweets from a shared account by holding a native NFT called the "TweetDAO Egg." Despite the project's initial viral success, it eventually faded, leading to the closure of its main Twitter account and website.
Following TweetDAO, Racer and a co-developer named Shrimp launched Stealcam, a Web3 platform where users can mint and buy pictures as NFTs, which remain hidden until purchased. However, due to the difficulty of maintaining profitable returns for creators, the developers eventually renamed Stealcam to Friend.tech. Launched in May 2023, Friend.tech aims to attract Web3 influencers and creators who are looking to monetize their content more efficiently, using a supply and demand driven economic model.
However, Friend.tech initially sparked controversy for its vague privacy and data security issues. The platform required users to download an app without a readily available privacy policy. This opacity raised concerns among users about how their personal data was handled, but this has since been partially addressed.
Additionally, the platformâs sustainability has come under heavy criticism. Initially, Friend.tech grew rapidly due to its influencer-centric strategy, but as the initial excitement faded, doubts about its long-term viability grew. Critics point to the platformâs over-reliance on influencers as a key vulnerability. Without the active participation of key figures, the platformâs value could decline.
Thatâs why the V2 update saw a strategic shift, from a KOL-centric model to one that focuses more on the broader community. Still, questions remain about the engagement levels of influential users and the actual value they bring when theyâre inactive.
But thatâs not all, as Friend.tech struggles to differentiate itself and retain users amid competition from X, Farcaster, and other decentralized competitors like Lens.
On the positive side, Friend.tech now benefits from having its own token, which opens up opportunities for trading and speculation. The project has over 160,000 followers on its social media platform X and is actively promoted by influential figures like Hsaka and Ansem, who encourage others to try the app. This promotion is obviously financially beneficial to them, but it also shows that the project has potential upside.
At the time of writing, Friend.tech has a market cap of $184 million, matching the fully diluted valuation. Compared to some other DeFi protocols or memecoins with higher valuations, $FRIEND is viewed by many on-chain traders as an attractive risk-reward investment given the project's profitability at a fundamental level. The involvement of high-profile investors such as Paradigm further bolsters the project's credibility.
Competitive analysis: Friend.tech vs Farcaster
Friend.tech started out with strong support by charging high fees and offering special club features, and was very successful at first. However, its popularity has waned, raising concerns about how to maintain user interest in the long term. In contrast, Farcaster does not have its own token, using the DEGEN token that many people have accepted in its ecosystem. This approach has helped Farcaster build a loyal community similar to traditional Internet forums, leading to a steady growth in the number of users and daily activity.
In summary, while Friend.tech made a lot of money early on, its changing user numbers make its future uncertain. Farcasterâs focus on building a strong community with the help of the DEGEN token seems likely to lead to more lasting success. This is because it has loyal users and multiple uses within the ecosystem. As both platforms continue to change and respond to user needs, their success in the competitive SocialFi market will depend on their ability to adapt.
Token Economics
The $FRIEND token is the core of Friend.Tech V2, serving not only as a currency but also as a key to attracting community participation. Its current market cap and fully diluted valuation is $185.26 million. A total of 92.63 million tokens were fully allocated to the community in the token generation event.
The token economics are designed to promote participation; users can claim tokens by interacting with the platform - 10% for following ten people, and the remaining 90% for joining a club. This ensures that the token distribution supports active ecosystem participation.
$FRIEND can only be traded within Friend.Techâs own system, which uses a native exchange with a 1.5% fee. This promotes liquidity and ensures the platform benefits from fee income, but also requires users to trust the stability of the platform.
The Club on Friend.Tech functions like a micro-government, allowing users to manage and customize their clubs, from setting names to economic parameters. This structure supports decentralized governance, with club leaders and moderators elected by key holders, reflecting DAO-like transparency.
While maintaining a similar user interface to V1, the introduction of $FRIEND tokens and clubs adds a new layer of participation and monetization. Transactions within clubs are subject to a 1.5% fee, which is split between liquidity providers and the platform, helping to maintain the financial health of the ecosystem and rewarding active participants.
Source: Dune Analytics
Bullish fundamentals
Bearish fundamentals
Even with the platformsâ initiatives, the crypto community remains skeptical about the potential for abuse of the system and the risk of pump-and-dump schemes.
When new Web3 apps like Friend.tech promise significant returns and strong community engagement, influencers tend to be quick to get involved. However, the project's vague goals and founders' history of previous failures should warn users to be wary of its long-term viability.
Its lack of a clear roadmap or white paper makes it difficult to outline a clear long-term vision.
Conclusion
Friend.tech offers an interesting concept in the SocialFi platform space, allowing users to invest in their âfriendsâ by purchasing social tokens or keys. These keys grant access to exclusive content, private chat rooms, and clubs, primarily for users and the corresponding influencers they follow. The pricing mechanism for these keys is complex, and the purchase price increases exponentially as the supply and volume increase. Although friend.tech presents better bullish fundamentals after the release of its V2 version, it also faces bearish factors, including concerns about downside liquidity and potential pyramiding dynamics.
Friend.techâs current valuation may look attractive to many on-chain enthusiasts, likely driving up its price. However, we remain cautious about its long-term sustainability.
