Trading volume is declining; where will friend.tech's SocialFi revolution go from here?

Written by: Biteye core contributor Louis Wang

Edited by: Biteye core contributor Crush

Friend.tech is a SocialFi application built on the Layer 2 network Base chain. It tokenizes each user's influence by binding their Twitter identity, giving users the opportunity to earn income through their influence.

Friend.Tech is currently in Beta, and users can only register via an invitation code. Users can only use Friend.Tech on mobile web and need to add the webpage to their home screen using a mobile browser to start the registration process:

1. Enter the registration page using the invitation code and link Twitter;

2. An MPC wallet is automatically generated for each new registered user, with privy.io as the wallet provider, and the wallet's private key can be exported;

3. Activate the account by verifying with a unique code or manually transferring at least 0.01ETH to the wallet on the Base chain. ETH is the primary currency used to purchase other users' keys (previously called shares);

4. Purchase your first key to complete registration. After the purchase, you will have a chat room where all those who bought your key can speak.

01 Product Features

The product features are currently quite limited, only allowing for friend positions and joining group chats. Users can see the most popular users on the homepage and can also manually search for users they want to follow and purchase their keys.

Holding someone else's key allows you to enter that user's (subject) chat room, and if the key is sold, you will be automatically removed.

02 Pricing Curve

In addition to interacting with KOLs by holding keys, Friend.Tech allows users to trade keys. To enter a small circle, you must buy keys, and the price of the keys will increase with purchases. There is no supply limit on each user's key, and the pricing is calculated by the formula:

Y = X\^2 / 16000

Where Y is the purchase price in ETH, and X is the current number of keys. The price curve as the keys change is as follows:

03 Tax Mechanism

All transactions on Friend.Tech will incur a 10% fee, with 5% going to the subject (KOL) and 5% going to the platform as revenue.

Combining the pricing curve and the tax mechanism, we can draw the following conclusions:

1. The pricing curve (bonding curve) is a very simple parabolic function. As seen in the table below, the price of keys starts off very cheap and rises rapidly with increasing purchase shares, allowing for a quick price increase with low costs, leading to a rapid growth of "unrealized profits," easily creating FOMO sentiment and attracting more participants.

2. Similarly, the price can also drop rapidly due to profit-takers selling, following the same curve, it can rise and fall in the same manner.

3. KOLs' earnings come from the fee tax, which aligns with the platform's interests, so they care more about trading volume. The more people "swing trade," the more fees they might earn compared to a unilateral price increase of keys, as rapidly rising prices can easily stagnate.

Currently, the top-earning user, crypto OG Cobie, has earned $150,000 from fees, with 52 people earning over $10,000:

(Source: https://dune.com/cryptokoryo/friend-tech-highest-earners)

4. Mechanically, Friend.Tech is somewhat like an NFT exchange, generating revenue through transaction taxes. Just attempting to speculate by trading keys incurs a 10% tax on each buy and sell, so even buying and selling in place can lead to significant losses, and a slight increase may not even yield profits.

The summary of the profit rules derived from the profit model shows the relationship between the buying position and total shares as shown in the table below:

https://www.coinonpro.com/news/toutiao/267527.html

In the early stages (1-18), as long as two people subsequently purchase keys, one can make a profit and exit, while those who buy later face stricter profit exit requirements. Specific profit requirements can be referenced in this table.

https://docs.google.com/spreadsheets/d/1lC5C4yAF8fZsGPEec1PnKe_0Mrb2-hi3o32HwkdHHig/edit#gid=112913128

5. Therefore, as long as you choose the right target, specifically KOLs who have opened Friend.Tech but have traffic expectations, early purchases are relatively easy to profit from, especially when Friend.Tech is hot and liquidity is abundant. You can use the cryptohunt tool to check popular and newly joined KOLs, with the system updating every 10 seconds, providing real-time monitoring.

(https://www.cryptohunt.ai/projects/friendtech)

6. This strategy has given rise to a type of profit-making method: Bots.

Realfriend.tech is a bot website that can discover newly joined Friend.Tech users with potential, ambushing them at very low prices in the early stages and then profiting as more users flood in. To use this site, you first need to purchase a key from the site's developer @iam4x.

(Source: https://www.realfriend.tech/)

Currently, 143 bots have earned over $2.2 million by tracking new accounts for opportunities.

(Source: https://dune.com/21co/friendtech-analysis)

04 Friend.Tech Data

Since its launch on August 10, Friend.Tech has become a hot topic. Firstly, it adopted an invitation mechanism as its GTM strategy (go-to-market is the plan for a company to bring a new product or service to market).

This hunger marketing strategy tends to attract users more effectively, as through invitations, users can experience and explore the Alpha version earlier than others.

Moreover, early participants in the project are more likely to gain price advantages. The invitation system also increases the discussion on Twitter, making it the best advertising method when everyone is talking about invitation codes.

(Source: https://dune.com/msilb7/friendtech-on-base-activity)

How popular is Friend.Tech? Within two weeks of its launch, under the invitation system, the user count reached 120,000, with a total of over 2.4 million transactions. The TVL exceeded $6.3 million, with a total market value of over 10,000 ETH, trading volume reaching 520,000 ETH, and protocol revenue nearing 2400 ETH.

(Source: https://dune.com/21co/friendtech-analysis)

Two weeks after launch, it ranked 5th in protocol fees over 7 days, only behind top Layer 1s and super apps like Ethereum, Lido, Uniswap, and Tron.

(Source: https://defillama.com/fees)

For Base, Friend.Tech is undoubtedly the traffic key for this Layer 2 public chain, with 21% of users on Base having used Friend.Tech, and 45% of gas consumption on Base coming from Friend.Tech.

(Source: https://dune.com/21co/friendtech-analysis)

05 Expectations for Friend.Tech

Friend.Tech is a SocialFi product centered around fan economy, monetizing each person's social value by issuing keys to users.

Its GTM strategy has been very successful, leveraging strong binding through Twitter to attract traffic, with the most likely beneficiaries being the traffic groups themselves, leading to recommendation code virality and hunger marketing-style launches.

The product is deployed on the recently launched Base chain, utilizing users' willingness for active interaction on Layer 2, providing a smoother on-chain interaction experience.

By first launching an off-chain points mechanism and then releasing investment news from Paradigm, a series of offensives have maximized user expectations.

It can be said that Friend.Tech has captured traffic and attention from day one, and the core of Web3 is attention.

Social

From the perspective of social features, Friend.Tech's functionality is currently too thin, limited to text and image communication;

Moreover, the app essentially only has paid features; if users do not purchase other people's keys, the app becomes virtually useless, lacking any experience. At least some free content is needed to engage users initially.

The user experience is more significant than the functionality; the good part is that there is no need to download the app through the App Store, providing a web experience that feels app-like;

The unique code allows for one-click cross-chain to the application wallet on the website, with smooth cross-chain operations.

The downside is that there are frequent lags requiring refreshes; in group chats, if you do not buy other users' keys, you cannot see others' messages, making it feel like the group leader is talking to themselves;

Users cannot know which Twitter influencers they follow have opened Friend.Tech, and can only search by Twitter ID…

Fi

In terms of Friend.Tech's Fi aspect, the design of the pricing curve is too steep, with key shares exceeding 100 pushing the unit price above 1 ETH, giving it a strong Ponzi flavor, especially when the social aspect is weak.

Many criticisms of Friend.Tech stem from this, viewing it as merely a scheme that will soon burst.

However, unlike a pure Ponzi, Friend.Tech has actual application value; it indeed provides scenarios that bridge users and KOLs, and even if latecomers are trapped by high prices, they may not "cut losses and exit."

Being trapped at high prices indicates that the purchased KOL has sufficient popularity and traffic; since selling will certainly incur losses, it is better to hold the key and enter the high-traffic KOL's circle, hoping for Alpha, with the potential to break even in the future.

Moreover, profitable users may not necessarily sell, as unless they are particularly optimistic about both Friend.Tech and the KOL, the shares purchased are generally not too many.

When a large influx of fans causes prices to skyrocket, it is highly likely that this KOL's FT group has special Alpha; selling keys at this point is akin to killing the goose that lays the golden eggs, so the selling pressure is manageable.

Another point is that Friend.Tech currently has no token issuance, with ETH as the circulating currency. Traditional Web3 projects' earnings are often limited by the rise and fall of platform tokens, while earning ETH feels like earning real money for users, thus avoiding the situation of a project collapsing due to token price plummeting.

For the pricing curve, a more reasonable approach would be to give pricing power to users, increasing diversification. Each user can customize according to their ID needs, which can influence the potential size of their fan circle and reasonably control growth speed.

Based on the above analysis, it can be inferred that Friend.Tech's current steep pricing curve easily creates an illusion of "unrealized profits," driving FOMO sentiment.

The growth point lies in more KOLs opening accounts or empowering fans through product upgrades, enhancing purchasing desire and willingness to pay. After launching image and video features, a wave of OnlyFans-like excitement can be anticipated.

The product is currently in Beta, and considering the timing of Paradigm's investment, the development time has not been long. Since its launch, it has been actively updated and maintained, so there is significant room for future product improvement, with a high ceiling;

Due to its actual application value, the lower limit is limited, and since there is no platform token, there will be no situation where a plummeting token price causes users to lose confidence and exit. At most, it will trend towards a dull state with no one paying attention, similar to the earlier hype surrounding Damus.

As the enthusiasm for Friend.Tech has subsided two weeks after its official launch, and due to its limited functionality, the enthusiasm lacks sustainability. A sharp decline in transaction volume and user activity can be observed, but the protocol's TVL remains stable, further confirming the previous point: users are not in a hurry to exit, and the next wave of excitement may come with Friend.Tech's feature iterations.

(Source: https://dune.com/21co/friendtech-analysis)

06 Conclusion

As Twitter begins to share creator revenue, the pressure on Lens-like social platforms is increasing, with user numbers and traffic profits clearly lagging behind Web2, making creators' willingness to switch platforms less intense.

The fan economy is a track where users are willing to pay. Imagine if Friend.Tech were accepted by the entertainment industry; it would be a heavyweight bomb capable of breaking into new circles.

With a ranking feature, fans can pay to boost their idols; it can quickly establish core fan circles, where one person can purchase multiple keys, rapidly raising the threshold for the circle and ensuring they are among the closest to the idol, but making it difficult for this core circle to expand.

This is the most promising direction for social applications in Web3, capable of achieving large-scale user growth.

Friend.Tech is a great SocialFi application, with a business model, GTM strategy, investment background, and timing of launching on Base that are difficult to replicate. However, the characteristics of the fan economy are currently limited by its rudimentary features, which have not yet been fully realized on Friend.Tech.

Friend.Tech may not necessarily be the killer app that can successfully run Web3 social, but it has set an example for the social track on how to retain real users amidst a Ponzi-like environment.