Source/blockcrunch
Compile/Nick
Officially launched on August 10, 2023, Friend.tech (FT) is a SocialFi platform deployed on the Base chain and was created by the developers of Stealcam, another SocialFi project on Arbitrum.
In just 12 days, FT achieved amazing results:
Attracting nearly 100,000 users, funds inflowed to 36,300 ETH, approximately $62.2 million.
One million transactions were processed, with a transaction volume of over 36,500 ETH, approximately $62.4 million.
Generating nearly 2,000 ETH in protocol fees, it was the platform with the second highest fee generation on August 22, second only to Ethereum.
With FT setting off a wave of craze on Twitter and support from investment institutions such as Paradigm, people can’t help but wonder: What exactly is FT? Is it expected to shape the future of decentralized social media?
What is Friend.Tech?
FT is a social platform that allows users to buy and sell creator shares. By holding these shares, you can access the creator's content and interact with the creator. In the current version, FT may be understood as OnlyFans, but it is currently limited to text functions.
What drives the FT craze is users’ ability to speculate on creators’ stock prices. On FT, the stock price is determined by a bonding curve, and the price dynamically adjusts based on the shares outstanding. Therefore, each purchase of new shares increases the price, while each sale of shares causes the share price to decrease.
The joint curve on the FT is naturally exciting. It provides better conditions for early investors, so it can incentivize users to quickly join and buy shares. Since the stock price will rise with increased participation, early participants will be incentivized to actively promote the platform, thus helping the platform user growth. This dynamic creates a self-sustaining cycle of popularity and expansion, making FT the center of attention for the crypto-native crowd.
In addition, creators take a 5% cut of each transaction, incentivizing them to promote users to buy their shares.
The reason why Friend.Tech explodes
Skeptics may say that FT's product is not new because its social features are not innovative compared to mature social media platforms such as Twitter subscriptions and OnlyFans. Furthermore, past attempts at financializing social networks, such as Steemit, Roll, and BitClout, all ended in failure after a brief period of brilliance. It can be seen that their suspicions are not unreasonable.
However, the FT gained 100,000 users and processed $62 million in transactions in just 12 days, a stunning achievement that sparked debate about whether it could embark on a different path than before.
FT’s strong performance to date can be attributed to the successful execution of:
(1) Drive FOMO:
Limited Access: Registering with FT requires an access code, which can be obtained from existing members. This feeling of exclusivity has everyone on Twitter scrambling for access codes.
Stocks are priced according to the bonding curve: As mentioned earlier, the bonding curve favors early entrants, thus creating competition among users who want to be the first to buy the stock.
Airdrop mechanism: Over a period of 6 months, app testers received a total of 100 million points, which were promised to be used for "special purposes" after the app was officially released, indicating that these points may be exchanged for FT tokens. As users accumulate points based on their in-app activity and the number of referrals generated through access codes, they are naturally incentivized to use and promote FT. This clever strategy not only stimulates users to actively participate in the platform, but also subtly encourages users to form consistent usage habits, considering the long duration of the activity, thus improving long-term user retention.
(2) Good user experience:
Use Privy for a smoother user experience: Unlike many dapps, which require users to associate their wallet or set up a new in-app wallet (often with the hassle of remembering a 12-word mnemonic phrase), using Privy provides a a more simplified approach. New users simply need to log in with their Google or Apple account and top up the automatically generated wallet. This effectively reduces login barriers, allays users' concerns that their original wallet may be hacked, and eliminates the need for a 12-word mnemonic phrase. Additionally, Privy enhances the overall user experience by removing the requirement for signatures on every FT transaction.
Use PWA Progressive Web Apps: About 83% of social media actions occur on mobile devices. However, getting encrypted apps onto the Apple or Android app stores is often challenging. To address this challenge, FT cleverly released it as a PWA, which functions like a native mobile app and users can "download" the app directly from the FT website. This approach not only circumvents the limitations of traditional app stores but also ensures a seamless user experience that is consistent with mainstream mobile usage trends.
Lack of sustainable incentives
Personally, I don't think FT is as revolutionary as everyone is touting it, and the current craze is just brought about by the "only going up, not down" stock price. Importantly, this is unsustainable and FT's share price will fall in the coming months.
(1) Lack of long-term and sustainable incentives to use FT
The main stakeholders of FT can be divided into three categories:
Creators: Those who actively manage their channels and encourage users to buy their own stocks, with the incentive to earn a 5% trading fee.
Consumers: Those who purchase shares to access a creator’s channel. The purpose is to review the creator's content or gain the opportunity to interact with the creator individually.
Speculator: Those who buy and sell stocks. The main motivation is to make money by speculating on stocks.
Of the three, speculators may be the first to leave. The nature of speculation means that early entrants often reap significant benefits. However, as the platform grows and the initial craze wanes, speculation tends to become less and less active as active trading becomes less profitable. For FT, the results are even more true due to its progressive joint curve. FT's stock pricing curve is supply squared, which makes its growth more exponential than a typical bonding curve. As the stock price gets higher and higher, attracting new users to invest will become a difficult challenge.
FT’s rising content costs are completely different from the popular models of other content social platforms. For example, platforms like Twitter and TikTok offer free content, while Twitter Subscriptions and OnlyFans offer exclusive content for a flat monthly fee.
This pricing strategy means that on FT, good content is reserved for those with deep pockets. As a result, many users may find themselves seeing lower quality content, resulting in lower engagement with FT, making them the next to potentially leave.
Speculators and consumers sell their shares when they leave the platform, which can cause a downward spiral in share prices. While this downward trend may result in short-term costs for creators, it's unlikely there will be enough buying demand to provide them with a sustainable incentive in the long term. As user engagement declines and content creation declines, the exodus of speculators and consumers is likely to accelerate, further dampening creator enthusiasm. This knock-on effect could be a precursor to FT’s decline, as the platform’s value proposition to all stakeholders weakens.
(2) Conflicting incentive mechanisms and business models
Digging deeper into the long-term motivations of creators reveals that incentives and business models also conflict.
On traditional content platforms, the main source of income for creators is continuous user participation and user retention. However, FT proposes a non-traditional model: creators earn revenue through trading activities, specifically by buying and selling shares with access to their content. Rather than encouraging stable, long-lasting relationships, this model seems to welcome churn.
This model can create an incentive misalignment between creators and users. Creators may be incentivized to capitalize on short-term transaction spikes rather than cultivating deep and lasting connections with users.
Although creators benefit when consumers purchase shares, the exponential growth of stock prices inherently limits the pool of buyers, effectively limiting the size of the group. Coupled with the fact that creators can only receive a one-time payment, rather than ongoing income, the sustainability of this model has been questioned.
Friend.Tech cannot escape the fate of being short-lived
Although Friend.tech set a single-day transaction volume record of over 4,000 ETH and 260,000 on-chain transactions on the second day after its launch, it triggered a wave of enthusiasm. But half a month later, the transaction volume also dropped sharply, and Friend.Tech could not escape the fate of being a flash in the pan. DefiLlama data shows that Friend.tech’s protocol revenue on September 1 was US$60,000, a drop of more than 96% from the peak of US$1.68 million on August 21. The number of active users per hour at Friend.tech has also dropped from a peak of more than 4,700 on August 21 to less than 600 per hour.
Regardless of the ultimate outcome of Friend.Tech, its recent performance provides an important lesson for Web3 builders and investors: While the ideas of decentralization and ownership are laudable, they are not by themselves the key to driving adoption or success. .
When it comes to user-centric crypto applications, the temptation to satisfy speculative desires and exploit “number-up” strategies often proves to be a powerful catalyst for initial engagement, while the idea can work in the background and be rolled out gradually.
Ultimately, long-term success requires more than just short-lived adoption or ideas. It is based on sustainable strategies that truly meet user needs and improve lives. To achieve lasting impact, platform creators must prioritize real value and solutions.
Gyro Finance contact information
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Xiao Huang (WeChat ID 18925291949)
Ning (WeChat ID 13631579042)
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