Friend.tech Research Report: Project Interpretation, Competitors, and Bullish and Bearish Factors

Introduction

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

Decentralized social media (DeSoc) offers a fresh perspective by revolutionizing the way creators monetize content and manage online relationships. It promises to enhance privacy, security, and most importantly, empower creators with complete control over their data and its monetization.

Although the concept of decentralized social networking is not new, it only began to gain significant attention in 2023 with the evolution of Web3 technology. Friend.tech, as a decentralized blockchain-based social network, aims to explore this emerging market. The platform distinguishes itself from other platforms by addressing common issues in centralized networks, such as company ownership of user data, limited privacy options, and the risks of content moderation.

In 2023, Friend.tech not only achieved significant growth but also generated revenue comparable to some top protocols, providing creators with the freedom to monetize their work on their own terms.

In today's article, we will take a deep dive into the platform, examine its controversial token issuance, compare it with its competitors, and assess its potential and related risks for 2024.

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 users' Web2 identities, 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 income to net deposit ratio in history, with over $2 million in revenue within the first month and net deposits of $33 million.

The core of the project is based on the concept of fan economy. To get started, users need an invitation code/referrer and deposit 0.01 ETH, which is the main currency for in-app purchases of shares in other users. These shares represent a portion of the user's influence. When someone buys shares, 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. Furthermore, this ticket chat conducted 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 a 5% fee each time someone buys or sells their shares (Key), providing financial incentives. To increase their income, KOLs need to enhance their Key trading activities. Additionally, 5% goes to the friend.tech finance department, totaling a 10% fee for each related transaction.

As we have pointed out, decentralized social media protocols gained significant attention last year but have recently experienced a fall.

On-chain data shows that since reaching its peak on September 13, Friend.tech's daily activity has significantly declined, recording 539,810 transactions on that day. Since then, interest in the platform has evidently decreased.

However, despite this decline and some criticism, there is a heated discussion among Friend.tech users about a potential revival. This excitement is driven by the anticipation of an upcoming airdrop, the news that users will have full control over their tokens, and the anticipation of the upcoming version 2, all of which have received a positive response from the community.

Let's take a deep dive into the differences between Friend Tech V1 and its updated version V2.

Friend Tech V1 Overview:

Friend Tech V1 is an innovative decentralized social platform that connects crypto influencers with their followers. By creating their own Keys, users can potentially profit by buying and selling KOL's "Key". The platform has gained a lot of attention. This model has been particularly popular during the bear market, helping the platform see a significant increase in users and activity. The platform generated approximately $13 million in fees from a high trading volume of $130 million and paid its users about $6 million in revenue.

However, this model has its drawbacks, mainly due to the high fees involved. With a 10% fee for buying and selling shares, users find it difficult to make a profit unless they sell their shares at a price significantly higher than the purchase price. This high turnover requirement to achieve profit leads to an inconsistent user experience and ultimately becomes a barrier for new users to join the platform.

Introduction and Unique Features of Friend Tech V2:

Friend Tech V2 will be released on March 3, 2024, introducing several new features and changes. Notably, users can now receive their $FRIEND tokens, marking a significant update. However, this release has been criticized for a lack of clear information and guidance, especially regarding new elements like "Club".

Club is a major new addition in V2, serving as a group space owned and managed by Key holders. The club has its own governance, including voting to elect a president who manages the club and appoints moderators. All transactions within the club use the $FRIEND token, and each transaction incurs a 1.5% fee. This allows for the introduction of referral fees and more flexible trading terms among club members.

However, the implementation process and user experience are not smooth enough. Users feel confused about how to claim their airdrops, join clubs, or even find the clubs they have already 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 the club, but faces challenges in execution and clarity, which may affect its long-term viability.

Team, Basic 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 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 findings raised concerns about their reliability and the potential for similar issues related to Friend.Tech.

In August 2023, Friend.tech secured seed funding from Paradigm, although the amount was not disclosed, and collaborated with the venture capital firm to create an online social interaction tool.

Rumors on X also indicate that Friend.tech has completed its Series A funding, with a valuation of $50 million. This round of financing included token certification, suggesting the possibility of them eventually issuing their own token, which indeed has happened.

Controversy

Friend.tech originated from a developer named Racer, who initially practiced in TweetDAO, a decentralized social media project. This platform allowed users to post tweets from a shared account by holding a native NFT called "TweetDAO Egg." Although the project achieved viral success in its early stages, it eventually faded away, leading to the closure of its main Twitter account and website.

After TweetDAO, Racer and a co-developer named Shrimp launched Stealcam, a Web3 platform where users can mint and purchase images as NFTs that remain hidden before purchase. However, due to the difficulty of maintaining creator profit returns, the developers eventually renamed Stealcam to Friend.tech. Friend.tech was launched in May 2023 and aims to attract Web3 influencers and creators looking for more effective monetization of their content, adopting a supply and demand-driven economic model.

However, Friend.tech initially sparked controversy due to its vague privacy and data security issues. The platform requires users to download an application without an easily accessible privacy policy. This lack of transparency raised concerns among users about how their personal data was being handled, but this has since been partially addressed.

In addition, the sustainability of the platform has also faced serious criticism. Initially, Friend.tech experienced rapid growth due to its influencer-centric strategy, but as the initial excitement faded, doubts about its long-term viability deepened. Critics pointed out that the platform's heavy reliance on influencers is a key vulnerability. Without the active participation of key figures, the platform's value may decline.

This is the reason for the strategic shift in the V2 update, transitioning from a KOL-centric model to a model that places greater emphasis on a broader community. Nevertheless, questions remain regarding the level of engagement of influential users and the actual value they bring during periods of inactivity.

But that's not all; Friend.tech is striving to differentiate itself and retain users in the competition with X, Farcaster, and other decentralized competitors like Lens.

On the positive side, Friend.tech is currently benefiting 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 clearly has economic benefits for them, but it also indicates that the project has potential bullish space.

As of the writing of this article, Friend.tech has a market capitalization of $184 million, matching its fully diluted valuation. Compared to some other DeFi protocols or meme coins with higher valuations, $FRIEND is viewed by many on-chain traders as an attractive risk-reward investment, considering the project's profitability at a fundamental level. The participation of well-known investors such as Paradigm further enhances the credibility of the project.

Competitive Analysis: Friend.tech vs Farcaster

Friend.tech gained strong support by charging high fees and offering special club features, initially finding great success. However, its popularity has since declined, raising concerns about how to maintain user interest in the long term. In contrast, Farcaster does not have its own token and uses the DEGEN token accepted by many within its ecosystem. This approach has helped Farcaster build a loyal community similar to traditional internet forums, resulting in a steady increase in user numbers and daily activity.

In conclusion, although Friend.tech made a lot of money in its early days, its fluctuating user numbers make its future uncertain. Farcaster focuses on building a strong community with the DEGEN token, which seems likely to bring more lasting success. This is because it has loyal users and various use cases within the ecosystem. As both platforms continue to evolve and respond to user needs, their success in the competitive SocialFi market will depend on their adaptability.

Token Economics

$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 stand at $185.26 million. A total of 92.63 million tokens were fully allocated to the community during the token generation event.

Token economics aims to promote participation; users can claim tokens by interacting with the platform------focus on ten people to receive 10%, while the remaining 90% must join a club. This ensures that token distribution supports active ecosystem participation.

$FRIEND can only be traded within the Friend.Tech system itself, which utilizes a native exchange feature with a 1.5% fee. This promotes liquidity and ensures