Original title: your network is indeed your net worth
Author: Kunal
Source: Medium
Compiled by: Lynn, MarsBit
This week, I'll be looking at the Friendstech and SocialFi prospects. Friendtech is consistently ranked among the top 5 paid platforms in the entire crypto ecosystem. There are many reasons behind their rise, and I will examine the reasons for this growth and whether it is sustainable moving forward.
1. How Friend.tech works
Friend.tech is a social application launched on Base. They haven’t launched a coin yet, but there are strong hints that they will. Users first link their Twitter accounts to the platform, which then gives them creator status. Creators can mint their own keys for free right from the start. Other users on the platform can then purchase the creator’s key to access chat rooms with the creator. In a chat room, all key holders can view the creator's messages, but not other key holders. As more users purchase the creator's keys, the key price will increase according to the bonding curve. Every time a new key is minted, the price (in ETH) increases, and every time a key is redeemed, the price decreases according to the slope of the curve (Delphi Digital, 2023).
Key price per user minted key quantity
The goal for early key holders is not only to gain early access to their favorite creators' content, but also to capture the key's potential price appreciation as the creator grows in popularity. This speculation about key prices has led to bots being developed to snipe potentially popular creators’ keys early in the syndication curve. Each time a creator's key is created or redeemed, 10% is deducted from the proceeds, which is split equally between the creator and the protocol. Content creators have used their chat rooms to share cryptographic alpha among their key holders and have even started offering free subscriptions to platforms like Artemis and other data tools.
2. Key trends and performance indicators
Friendtech has shown exponential growth in terms of daily transactions and protocol fees since its launch. Despite intervening weeks of inactivity, they were still able to achieve around 500,000 transactions and 1 million fees per day at their peak. While activity has cooled down a bit over the past two weeks, the number of transactions and fees averaged around 200,000 and 500,000 respectively, which is remarkable considering the protocol just launched on August 10th.
Daily transactions since the launch of the user platform
The user platform has been charged daily since its launch
A survey of the number of traders shows a similar trend, with the platform’s average retention rate since its inception being 60%. The platform has approximately 12,000 daily active traders. These statistics indicate that the number of trades per trader is approximately 20.8. As of the end of August, active key holders were using Friendtech for more than 30 minutes a day. Please note that many of these statistics may be inflated due to the presence of bots that place large volumes of trades in a day in order to profit from changing key prices.
User platform daily traders since launch
3. Growth drivers
The hype during Base's launch resulted in many users exploring Dapps on Base, including Friendtech. This coupled with a simple onboarding process via an in-app wallet and Twitter account link (which most crypto users already actively use) attracts users. Users who are new to cryptocurrencies can even join using a credit card. Many cryptocurrency influencers with relatively large followings started using the app to test it out, especially since it cost them essentially nothing to mint their own keys. This sets off a flywheel effect where followers of these users join the app to be able to chat privately with the influencer > buy more keys > increase in key prices > profits for Twitter influencers and early followers > more Twitter influencers Join with followers.
The highly anticipated potential airdrop is another growth driver. We know how much cryptocurrency users love farming airdrops. Friendtech is running the points system in test mode for 6 months, with 4 million points being distributed every week. Points are initially allocated to users who are more active on the platform and engage in more transactions. However, they recently changed their system to reward key holders instead of traders, which may explain why activity and fees dropped last week. In response, many users started buying and holding their own keys to earn points, but this was also recently punished by Friendtech. Friendtech has been using the lure of airdrops to change user behavior on its platform.
The final growth driver can be attributed to increased robotic activity. Bots are designed to buy keys early on the curve and unload them quickly for profit. The top bot earned approximately 345 ETH with an average holding time of only 17 minutes (Delphi Digital, 2023). About 25% of application fees are generated through bot trading.
4. Competitor analysis
Friendtech’s success spurred the launch of other on-chain forks. The core concept remains the same, but the functionality is slightly different. Below is a high-level competitor analysis, and interestingly, the one with no announced airdrop has the lowest market share.
Competitor analysis in the user SocialFi field
5. Sustainability of the Agreement
If Friendtech wants to remain sustainable in the long term, it needs to focus more on the social aspect rather than the financial aspect. Users should use their apps to interact personally with influencers/stars, otherwise they will not have access either. Imagine if Taylor Swift had a private chat room with her fans and she could issue tickets/merchandise to her key holders in advance. Friendtech has the potential to be a bridge between Web 2 and Web 3 users, but there's still a long way to go. Let’s look at some issues from the perspective of different stakeholders.
Users/Followers
The presence of bots makes it more expensive for users to access content creators. Even basic cryptocurrency influencers have around 20,000 followers and most of their keys are snapped up within minutes. This means that most users can only access these chat rooms for >$1000 (1 ETH). Is the alpha shared in a chat room like this so valuable that it's worth over $1000? I highly doubt it. This will be a barrier for people holding multiple creator keys. If a 10% tax were imposed, this could further hinder long-term user adoption as it would make it more difficult for users to easily switch between content creators. Furthermore, holding multiple keys serves no purpose other than to speculate on prices, which is unnecessary.
content creator
While the platform allows influencers to monetize their followers, this may not be sustainable. Imagine a content creator wants to make some profit. The only way he can do this is to throw away his key, which would harm the key holder and potentially affect their reputation. The bonding curve mechanism actually makes it harder for content creators to reach the masses because it becomes too expensive for late adopters.
protocol
When users buy and sell larger amounts of keys, protocols and content creators earn more fees. But if users do this, it means that they are not really doing it to socialize, but to make money, which goes against the original intention of the platform.
6. Key indicators to pay attention to
It will be interesting to see how things develop after the airdrop. It will provide a clearer picture of who is using the technology and who is conducting the airdrops. I do expect trading volume and fees to drop after the airdrop. Additionally, given the expected extent of the drop in airdropped tokens, there will likely be a large sell-off initially.
Another key metric to keep an eye on is the bid/ask ratio. If the ratio is below 1 for several weeks in a row, it is a strong indication that users are cashing out, and those who left their keys behind may be “stuck.”
User Yellow Line: Key Daily Buy/Sell Ratios
7. Conclusion
While I personally believe the current model is unsustainable in the long term, it's important to know that Friendtech is still in beta mode. I'm sure the team is aware of its shortcomings and may roll out new features under the guidance of investor Paradigm. I will wait for more details to be announced about their token’s utility and supply. This will give us a better idea of the road ahead.
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