Friend.tech is a SocialFi application built on the second-layer network Base chain. Its core concept is to turn users' influence on Twitter into tradable tokens. It is a social trading protocol that is both popular and controversial. Blockchain NFTs
Web3 social era begins
At present, the market has entered a bear market that has lasted for a long time. The popularity of blockchain games and NFT and other fields has also declined. The Ponzi economic model of past projects has rapidly collapsed in the absence of sustained growth. This has caused certain damage to the growth of Web3 users. limit.
On the one hand, the development of Web3 requires continuous development of new application scenarios and innovative methods to attract new users to join. On the other hand, the social field has proven its huge potential in the traditional Internet field. From social platforms such as Facebook, Instagram and Tiktok to the maturity of WEB3 social DAPPs such as Cyber Connect, Debank and Lens Protocol, the ecosystem in the entire social field has become increasingly stronger. Most of the Web3 social projects we see today are copies of existing successful social networking products, just adding encryption capabilities. This trend shows that the social field has huge development potential in Web3, and as the ecosystem continues to grow and innovate, social is expected to become the next field to detonate the growth of Web3 users.
Friend.tech was officially launched on August 10, 2023. After a week of low-key development, it began to usher in an explosive period of user growth on August 18.
Introduction to Friend.tech
Friend.tech is a SocialFi application built on the second-layer network Base chain. Its core concept is to turn users' influence on Twitter into tradable tokens, which gives users the opportunity to earn income through social influence. ETH is the main payment currency in the application and is used to purchase other users' KEY. Users need to pre-deposit 0.01 ETH before use. The function of KEY is similar to paid subscriptions in traditional Internet products. The advantage of purchasing them is that you can get the friend status of the purchased person, so that you can access the creator's content and interact directly.
When users enter the application, they can see the most popular users on the homepage. They can also search for users they follow through the explore button and purchase their KEYs. The initial price of each user's KEY is set based on Twitter data, and there is no upper limit on KEY supply. It links the user's KEY price to the market supply and demand, which means that the more popular the user, the higher the KEY price will be, thus creating a dynamic market ecosystem.
Friend.tech product features
The core function of Friend.tech is that after users purchase the KOL's KEY, they can talk to them and obtain the rights granted by the KOL. Its functions are currently relatively monotonous, only having friends and joining group chats, and cannot accept sending pictures, videos, etc. Users can see the most popular users on the homepage, or manually search for users you want to follow and purchase their KEYs. If you hold someone else's KEY, you can enter that user's chat room. If you sell the KEY, it will be automatically removed.
Friend.tech’s pricing curve
In addition to holding KEY and interacting with KOL, Friend.Tech's feature is that it allows users to trade KEY. Since each KOL’s KEY does not have an automatic market maker, its KEY has no supply limit. Therefore, the pricing of KEY is calculated using the following bonding curve formula:
y = x^2 / 16000
Where:- y represents the price in ETH.
- x represents the total KEY supply at the current moment.
The curve of price changing with key is as follows:
All transactions on Friend.Tech will be charged a 10% handling fee, of which 5% will be given to the purchaser (KOL) and 5% will be given to the platform as platform revenue.
Combining the pricing curve and the pumping mechanism, we can draw the following conclusions:
- Friend.Tech adopts a parabolic pricing curve. This design makes the price of KEY relatively cheap at the beginning, but as the number of users buying KEY increases, the price rises rapidly. This strong price fluctuation will trigger FOMO emotions and attract more users to participate.
- The price of Friend.Tech is highly sensitive, fluctuating wildly with changes in buying and selling activity. This attracts speculators who seek to profit from price fluctuations. Likewise, because the price mechanism is the same, selling will also cause the price to fall rapidly, resulting in losses.
- The way KOL earns income on the Friend.Tech platform is consistent with the interests of the platform. Therefore, KOL may be more concerned about the trading volume on the platform rather than empowering its EKY.
- Friend.Tech’s rake mechanism has had an impact on users’ speculative behavior. Even if users conduct short-term buying and selling, they must pay a 10% transaction fee, which will affect their speculation strategies.
Why was Friend.tech so popular?
1. Airdrop expectations
In the traditional token economic design, the trading motivation of fan tokens mainly comes from users' love for creators. The rise and fall of token prices is not the main attraction for users. However, Friend.Tech introduces a new user invitation mechanism and fan token economics, which are completely different from the original token economic model. Friend.Tech stated that it will distribute 100 million points within six months. This point is generally believed to be related to the token airdrop. This mechanism, combined with the user invitation mechanism, enhances the motivation of users to actively invite new users to join the platform. At the same time, it also encourages users to purchase KEY from different KOLs to earn transaction fees and data. This strategy is similar to the airdrop strategy of projects such as Blur, which uses long-term point incentives and expected token airdrops to attract users to use the product.
2. Dividends in the early stages of BASE chain launch
Friend.Tech is built on the Base chain. In the current L2, Base has the greatest potential for new user inflows, and the trading experience on Base is very comfortable. It is also backed by Coinbase, a listed exchange. Friend.Tech chose to issue it online on Base, cleverly seizing the hot spots in the market and the time bonus.
3. Paradigm top VC background endorsement
For the Friend.Tech project, it is undoubtedly a huge advantage to have the favor of Paradigm, the top investment fund in the crypto. Even when the project is not fully developed and lacks a detailed project white paper, the market still has confidence in the project. This trust and investment is largely related to Paradigm's support and endorsement.
In addition, it can be seen from the points mechanism of the Friend.Tech project that it adopts an incentive design similar to the Blur project, which may be under the influence of Paradigm. This design is to encourage users to actively participate in the platform and provide a long-term incentive method, which is consistent with Paradigm's overall strategic direction for the project.
4. User groups
Friend.Tech has fundamentally eliminated low-quality user accounts through the clever design of its incentive rules. Its first users and current promoters are opinion leaders in a certain field. These KOLs have a large and highly sticky fan base. In the field of social products, highly anticipated projects on the market like Deso and Lens usually face a problem, that is, it is easy for a single user to have multiple accounts. This phenomenon inevitably accelerates the product bubble process.
Data performance of Friend.tech
Since Friend.Tech was launched on August 10, it has aroused extensive discussion and interest in the Chinese area. First of all, it uses an invitation mechanism as its marketing promotion strategy. Through invitation rules, users can experience the Alpha version of Friend.Tech before others. In addition, users who participate in the project early will also get a price advantage, because in the initial stage, the price of KEY is usually lower. When Friend.Tech was first launched, it triggered extensive discussions among Twitter's KOL groups, and its hunger marketing techniques further fueled this trend of discussion. When everyone is talking about Friend.Tech’s invitation code, this itself becomes the best advertising method.
1. User data
According to the dune data panel, Friend.tech currently has a cumulative number of transactions of approximately 10.284 million, with approximately 347,000 buyers and 185,000 sellers.
Source : https://dune.com/cryptokoryo/friendtech
Source : https://dune.com/cryptokoryo/friendtech
Source : https://dune.com/cryptokoryo/friendtech
It can be more clearly seen from the number of transactions that on-chain transactions became more active after August 18.
Source : https://dune.com/cryptokoryo/friendtech
2. Transaction volume
The figure below shows the buyer/seller transaction data: the buyer's transaction volume reached 136,186.5 ETH, valued at approximately US$223 million, and the seller's transaction volume was 108,706 ETH, valued at approximately US$178 million.
Source : https://dune.com/cryptokoryo/friendtech
Source : https://dune.com/cryptokoryo/friendtech
Judging from the target buying and selling data, there are currently about 343,000 traded targets.
Source : https://dune.com/cryptokoryo/friendtech
What are the potential risks of participating in friendtech?
1. High margin, 20% margin for recent + forward transactions
The more people hold KEY, the higher the price the next person who enters has to pay to buy Keys, but the number of holders also increases or decreases with buying or selling. This means that if subsequent purchases are insufficient, from the moment you buy KEY, you will have already lost 10% without taking into account sales taxes and fees.
2. Bot arbitrage, the low price range is occupied by Bot
There is a problem in the Friend.Tech community that community members generally expect KOLs with more traffic and influence to have higher KEY value. This expectation has led some Bots to find opportunities. They buy KEY tokens in advance by analyzing data, and then sell them after reaching a certain level of profit. Even if some users take some measures, such as turning on Twitter’s privacy mode to prevent bots from analyzing their data, there are still some bots that carry out MEV (Maximum Extractable Value) attacks through secondary transactions on the chain.
This situation has raised the threshold for normal users to enter the Friend.Tech platform to a certain extent, because they must compete with Bots for transactions.
3. Pricing models grow exponentially
Friend.Tech's user KEY price follows a specific curve: price (calculated in ETH) = (KEY token amount^2)/16,000. This curve design makes it almost cost-free for early buyers, but as the number of KEY tokens purchased exceeds 20, the price difference between users expands sharply.
The impact of this price curve is that when multiple KEYs are purchased, the price may increase exponentially in the short term. In addition, the high multiple price attracts more users to participate, but once the growth of new users reaches its peak, early users Once you start selling for profit, the price will drop sharply, triggering panic selling and eventually causing the market to fall into a death spiral. Users who purchase later will not only have to bear the 20% frictional cost, but also face the drop in the price of KEY tokens, which will inevitably lead to losses.
This chain of effects created serious liquidity problems. Once the price drops, the liquidity of the market decreases sharply. According to the typical behavior of crypto users, social interaction will also decrease, and the originally active community may shrink further. This can lead to once-thriving communities stagnating or regressing to their original state of inactivity. At present, this problem is gradually exposed.
Summarize
Friend.tech is a social trading protocol that is both popular and controversial. As can be seen from the pricing model of its token, its mechanism design is relatively FOMO. Based on good airdrop expectations and the occasional huge profit effect, the project will definitely have very eye-catching user data in the short term. Currently, the popularity of Friend.Tech is continuing to rise, the number of active addresses is growing rapidly, and the value of assets locked on the chain is also growing rapidly.
Returning to the product itself, can the value that KOL provides to users maintain a certain retention rate for the number of users? If users come for profit, will they be lost significantly when the price drops? If it cannot truly connect fans with KOLs, Friend.Tech’s follow-up will be a bit unpredictable.
In general, Friend.Tech is relatively conservative in terms of product mechanisms, but has bold innovations in token economic design, user acquisition strategies and marketing. In the short term, Friend.Tech may copy the user growth path of the Blur project, but considering the characteristics of social products, realizing long-term social attributes requires observation and time to verify the effectiveness of its innovative strategy.
Author: Snow
Translator: Sonia
Article reviewer: Edward, Wayne Zhang, Elisa, Ashley He, Joyce
Copyright: Gate.io
