Opening Remarks

According to the Social Global Market Report 2024, the social media industry has experienced significant expansion, with its market value expected to increase from $219.06 billion in 2023 to $251.45 billion in 2024, reflecting a compound annual growth rate of 14.8%. Approximately 62.3% of the global population engages with social media, spending an average of over two hours daily.

Source: Smart Insights

Decentralised social media (DeSoc) offers a refreshing perspective by revolutionising how creators monetize their content and manage online relationships. It promises improved privacy, security, and most importantly, gives creators full control over their data and its monetization.

While the idea of DeSoc isn’t new, it only started drawing significant attention in 2023, fueled by the increased interest in Web3 technologies. Enter Friend.tech, a decentralised blockchain-based social network designed to tap into this emerging market. This platform distinguishes itself by tackling common issues found in centralised networks, such as ownership of user data by companies, limited privacy options, and the risk of content censorship.

In 2023, Friend.tech not only saw major growth but also generated revenue that rivalled some of the top protocols, providing creators with the freedom to monetize their work on their terms.

Source: DuneAnalytics

In today’s article, we’ll delve deeply into the platform, examining its controversial token launch, comparing it with its competitors, and evaluating its potential and associated risks for 2024.

We previously covered Friend.tech in 2023. You can read the full article by clicking here.

Project Overview

Friend.tech is a decentralised social platform built on the second-layer network, Base Chain, launched by Coinbase. It integrates closely with X to acquire users’ Web2 identities, which allows users to potentially profit based on this identity. Within 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 within SocialFi, which reached the highest revenue-to-net-deposits ratios ever, with more than $2M in revenue in the first month and $33M in net deposits.

At its heart, the project is built on the fan economy concept. To get started, users need an invite code and deposit 0.01 ETH, which is used as the main currency within the app to buy shares in other users. These shares represent a piece of the user’s influence. When someone buys a share, they gain the ability to start one-on-one chats with the person they’ve invested in. This setup allows users to connect directly and personally with their favourite influencers. Also, this token-gated chats through these tokens called ‘keys’ or ‘shares’ that can be traded, allowing users to potentially profit from a content creator’s growing popularity.

For social influencers there’s also a financial incentive as they earn a 5% fee every time someone buys or sells their shares. To increase their earnings, KOLs need to boost the trading activity of their shares. The other 5% goes to the friend.tech Treasury, totalling a 10% fee for every share buy/sell related transaction.

As we already pointed out, the decentralised social media protocol garnered significant attention last year but has recently experienced a decline.

Source: Dune Analytics

On-chain data shows a significant drop in daily activity on Friend.tech since it reached its peak on September 13, with a record 539,810 transactions in one day. Since then, interest in the platform has clearly decreased.

However, despite this decline and some criticism, there’s buzz among Friend.tech users about a potential revival. This excitement is driven by the anticipation of a forthcoming airdrop, an announcement that users will have full control over their tokens, and the upcoming launch of Version 2, all of which have been positively received by the community.

Let’s delve into the differences between Friend Tech V1 and its updated version, V2.

Friend Tech V1 Overview:

Friend Tech V1 was an innovative decentralised social platform that connected crypto influencers with their followers. It gained a lot of traction by creating a dynamic where both influencers and users could potentially profit through a system of buying and selling “shares” in influencers’ social influence. This model was especially popular during the bear market, helping the platform see a massive growth in users and activity. The platform generated around $13 million in fees from a high trading volume of $130 million, and it paid out about $6 million in revenue to its users.

However, the model had its drawbacks, primarily because of the high fees involved. With a 10% fee on both buying and selling shares, users found it hard to make a profit unless they sold their shares at significantly higher prices than they bought them. This requirement for high turnover to achieve profit led to inconsistent user experiences and eventually acted as a barrier for new users joining the platform.

Friend Tech V2 Overview and Differences:

Launched on March 3, 2024, Friend Tech V2 introduced several new features and changes. Notably, users can now claim their $FRIEND tokens, which marks a significant update. However, the launch has been criticised for its lack of clear information and guidance, particularly regarding new elements like the “clubs.”

Clubs are a major addition in V2, acting as group spaces owned and moderated by keyholders. Clubs operate with their own governance, including voting for a president who manages the club and appoints moderators. All transactions within a club use $FRIEND tokens, and each transaction incurs a 1.5% fee. There’s potential for features like referral fees and more flexible trading terms among club members.

However, the implementation has been less than smooth. Users are confused about how to claim their airdrops, join clubs, or even find clubs they’ve set up, as the platform has not provided clear instructions or interface cues.

In summary, while V1 was focused on rapid growth and revenue through high fees, V2 aims to enhance user governance and interaction through clubs but faces challenges in execution and clarity, which could impact its long-term viability.

Team, Foundational Support and Strategic Partnerships

Friend.Tech was developed in August 2023 by anonymous individuals, 0xRacerAlt and shrimppepe, who have a controversial history within the crypto community. On platform X, members have pointed out that these developers were also involved in a faltering NFT project. Further scrutiny by Kalland revealed that 0xRacerAlt had deleted several tweets linking to this NFT project and had held an official position in the Kosetto Discord. These revelations raised concerns about their reliability and the potential for similar issues with Friend.Tech.

In August 2023, Friend.tech secured seed funding from Paradigm, though the amount wasn’t disclosed, and teamed up with the VC firm to create tools for online social interactions.

Rumours on X also suggest that Friend.tech completed its Series A financing, achieving a valuation of $50 million. This financing round included token authentication, hinting at the eventual issuance of their own tokens, which indeed happened.

Controversy

Friend.tech originated from a developer known by the name of Racer, who initially made a mark with TweetDAO, a decentralised social media project. This platform allowed users to post tweets from a shared account by holding a native NFT called the “TweetDAO Egg.” Despite its early viral success, the project eventually faded, leading to the closure of its main Twitter account and website.

Following TweetDAO, Racer, alongside a co-developer named Shrimp, launched Stealcam, a Web3 platform where users could mint and purchase images as NFTs, which remained hidden until bought. However, due to difficulties in maintaining profitable returns for creators, the developers eventually rebranded Stealcam to Friend.tech. Launched in May 2023, Friend.tech aimed to attract Web3 influencers and creators looking to monetise their content more effectively, employing an economic model driven by supply and demand.

However, Friend.tech initially became controversial due to its vague privacy practices and data security concerns. The platform required users to download an app without a readily accessible privacy policy. This lack of transparency raised concerns among users about the handling of their personal data, but have since been partially addressed.

Also, the platform’s sustainability has been heavily critiqued. Initially, Friend.tech enjoyed rapid growth thanks to its influencer-centric strategy, but as the initial excitement diminished, doubts about its long-term viability intensified. Critics pointed out the platform’s over-reliance on influencers as a critical vulnerability. Without active engagement from key figures, the platform’s value could drop.

This is what led to a strategic pivot in the V2 update, moving from an influencer-based model to one more focused on the broader community. Despite this, questions remain about the engagement levels of influential users and the actual value they bring when they are not active on the platform.

But that is not all, Friend.tech struggles to differentiate itself and retain users amidst competition from platforms like X, Farcaster, and other decentralised 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 boasts over 160,000 followers on its social media platform, X, and is actively promoted by influential figures like Hsak and Ansem, who encourage others to try the app. This promotion obviously benefits them financially, but it also suggests potential upside for the project.

At the time of writing, Friend.tech has a market capitalization of $184 million, with a fully diluted valuation to match. When compared to some other DeFi protocols or meme coins that have much higher valuations, and given how profitable the project has been on a fundamental level, it’s no surprise that $FRIEND is seen as an attractive risk-reward investment by many On-Chain traders. This interest is further bolstered by the involvement of reputable investors like Paradigm, which adds a layer of credibility to the project.

Competitors: Friend.tech vs Farcaster

Data sourced from Dune Analytics on May 6, 2024

Friend.tech started off strong by charging high fees and offering special club features, which made it very successful at first. However, its popularity has dropped, raising concerns about keeping users interested over time. In contrast, Farcaster, which doesn’t have its own token, uses the DEGEN token that many people in its ecosystem accept. This approach has helped Farcaster build a loyal community similar to traditional internet forums, leading to steady growth in user numbers and daily activities.

In conclusion, although Friend.tech made a lot of money early on, its changing user numbers make its future uncertain. Farcaster’s focus on building a strong community with the help of the DEGEN token seems like it could lead to more lasting success. This is because it has loyal users and a variety of uses within its ecosystem. As both platforms keep changing and responding to what users want, their success in the competitive SocialFi market will depend on how well they adapt.

Tokenomics

The $FRIEND token is central to Friend.Tech V2, serving not only as a currency but also as a key to engaging the community. It currently has a market cap and fully diluted valuation of $185.26 million. The total supply of 92.63 million tokens was fully allocated to the community at the token generation event.

Tokenomics are designed to foster participation; users can claim tokens by engaging with the platform — 10% for following ten people and the remaining 90% for joining a club. This ensures token distribution supports active ecosystem involvement.

$FRIEND can only be traded within Friend.Tech’s own system, which uses a native swap function with a 1.5% fee. While this promotes liquidity and ensures the platform benefits from fee revenues, it also requires users to trust the platform’s stability.

Clubs on Friend.Tech function like mini-governments, allowing users to manage and customise their clubs, from setting names to economic parameters. This structure supports decentralised governance, with club leaders and moderators being elected by key holders, reflecting a DAO-like transparency.

Despite maintaining a similar user interface to V1, the introduction of $FRIEND tokens and clubs adds new layers of engagement and monetization. Transactions within clubs are subject to a 1.5% fee, split between liquidity providers and the platform, which helps sustain the ecosystem’s financial health and rewards active participants.

Source: Dune Analytics

Bullish Fundamental Factors

• According to Dune Analytics, Friend Tech is experiencing a surge in activity and user adoption following its recent controversial airdrop and v2 upgrade.

Source: Dune Analytics

• Despite its low market cap, especially when compared to other projects and meme coins generating less revenue, $FRIEND is positioned attractively for potential price appreciation by on-chain traders. While it currently lacks listings on major exchanges, investors should keep an eye out for any potential listings on top-tier exchanges, which would significantly enhance the token’s accessibility.
• Friend.Tech is recognized as one of the two most popular apps on Coinbase’s L2, with its competitor Farcaster valued at $1 billion.
• The app generated $50 million in revenue during its V1 phase, indicating significant potential for the team to capitalise on V2 and expand its total addressable market beyond just the crypto Twitter community. With ample funds available for marketing, infrastructure improvements, and other initiatives, the outlook for Friend Tech can still be promising.

Bearish Fundamental Factors

• Even with the platform’s initiatives, there are still doubts within the crypto community regarding the potential for system abuse and the risk of pump-and-dump schemes.
• When new Web3 applications like Friend.tech promise significant returns and strong community engagement, influencers are often quick to get involved. However, the project’s vague objectives and the founders’ history of previous failures should caution users about its long-term viability.
• It lacks a roadmap or whitepaper, making it challenging to outline a clear long-term vision.

Closing Thoughts

Friend.tech offers an intriguing concept in the realm of SocialFi platforms, allowing users to invest in their ‘friends’ through the purchase of social tokens or keys. These keys grant access to exclusive content, private chat rooms and clubs, primarily targeting users and the respective influencers they follow. The pricing mechanism for these keys is intricate, with buying prices increasing exponentially with supply and amount. While friend.tech presents better bullish fundamentals after the release of its V2 version, it also faces bearish factors, including concerns about the downside liquidity and potential pyramid-like dynamics.

The current valuation of Friend.tech might seem attractive to many on-chain enthusiasts, potentially driving up its price. However, we remain cautious about its long-term sustainability.

Disclaimer

This presentation has been prepared by Greythorn Asset Management Pty Ltd (ABN 96 621 995 659) (Greythorn). The information in this presentation should be regarded as general information only rather than investment advice and financial advice. It is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In preparing this document Greythorn did not take into account the investment objectives, financial circumstance or particular needs of any recipient who receives or reads it. Before making any investment decisions, recipients of this presentation should consider their own personal circumstances and seek professional advice from their accountant, lawyer or other professional adviser. This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various assumptions. Greythorn is not obliged to update the information. Those assumptions may or may not prove to be correct. None of Greythorn, its officers, employees, agents, advisers or any other person named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of any forward looking statements or any of the assumptions upon which they are based. Greythorn and its officers, employees, agents and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. None of Greythorn and its officers, employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this presentation. This presentation is the property of Greythorn. By receiving this presentation, the recipient agrees to keep its content confidential and agrees not to copy, supply, disseminate or disclose any information in relation to its content without written consent.

Disclaimer：

1. This article is reprinted from [medium], All copyrights belong to the original author [Greythorn Asset Management]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.