Can Social Ponder recreate the glory days of DeFi Summer?

Original source: Shenchao TechFlow

Friend.Tech is on fire.

This KOL-centered model that allows fans to buy and sell KOL shares is not complicated, and it has a bit of a Ponzi flavor; but in the deep bear environment of hot spots and tight liquidity, Friend.Tech is indeed Created a SocialFi craze.

For example, Star Arena, which has become very popular on the Avalanche chain in the past week, is still the focus of everyones attention despite the ups and downs of the Avalanche founders platform calling for orders and contract vulnerability funds returning to zero.

Meanwhile, the craze continues to spread:

Starting from the Base L2, FTs imitation disk projects quickly emerged in other ecosystems such as Avax, Arbitrum, Solana, Polygon and Bnb. These projects are making different improvements and innovations based on FT, trying to seize this hard-won popularity;

When I open Twitter, a large number of Crypto-related topics and accounts continue to discuss and introduce FT and other projects. There seems to be a sense of fomo that if you dont participate, you will miss out on 100 million.

DeFi Summer, a familiar taste

The pursuit of profits, the emergence of imitation disks, and the continuous topic...does this all feel a bit familiar?

Yes, you can easily think of DeFi Summer in 2020.

Chris, a partner at the well-known VC Placeholder, said that Social Ponds is the new DeFi Summer, and described the development process of current projects such as FriendTech and DeFi Summer:

An experiment --> Traffic influx --> A feasible model begins to sprout --> Attract more attention and improve the experience --> Larger applications emerge --> Let others participate within 18-24 months .

If you carefully look back at the DeFi Summer 3 years ago, you will find that this development path does seem familiar.

In June 2020, Compound implemented the liquidity mining method on a large scale, attracting many players to provide liquidity; subsequently, multiple different protocols found that this model was feasible, and began to learn from and improve the design of liquidity mining. Make a fuss about the currency and economic model to attract more people to join.

In the end, the TVL of the entire DeFi track skyrocketed from US$1 billion in June to US$10 billion in October, and the number of users also increased dramatically; at the same time, the gas fee on Ethereum also hit a record high at the time.

The concept of liquidity mining and a leading project have led to a whole summer of excitement and established DeFi’s solid position.

The concept of Social Pond, a leading Friend.Tech, has led to a number of imitation disks in different ecology, will it trigger the craze of SocialFi? Practitioners seem to have smelled a similar smell and are looking forward to the arrival of the market turning point.

Craving traffic, detonating traffic

Although SocialFis surge in popularity seems to have a similar development path to DeFi Summer, it is facing a more stringent market environment - the entire market seems to be hungry for traffic more than ever.

When the market goes bearish, various L2s appear together. As there is no difference between technology and performance, each L2 hopes to find a traffic grabber to gain attention and liquidity in the internally competitive environment.

So we saw that the emergence of Friend.Tech caused Bases TVL to skyrocket, and it quickly caught up in the L2 competition and gained a solid place.

And this desire for traffic is even more obvious on the almost obsolete L1.

Professor Gun, the founder of Avalanche Chain, has publicly expressed his support and optimism more than once since the emergence of Star Arena. Even if SA had all its funds stolen due to a contract vulnerability, Professor Gun also called on everyone to give new applications some room for trial and error, waiting for their recovery and reconstruction.

Regardless of whether SA is officially developed by Avalanche or the so-called national market, the founders public platform to call for orders shows the traffic desire of the L1 public chain.

A phenomenon-level application brings the possibility of revitalizing the originally lifeless public chain ecosystem. It is even more precious in the current L2 environment where the spotlight is on.

It is also the voice and participation of key figures that further confirms the basic logic of social products such as FT and SA detonating traffic:

Through attractive expectations or incentives, attract traffic to complete the cold start of the product; then use appropriate communication strategies to trigger more traffic to join and increase the network effect of social products.

Borrowing the theory from the classic communication book The Tipping Point, if a product or topic wants to become popular, it needs to follow three rules:

• The Law of Individual People: For a message to become popular, it must be spread through the social skills, energy, enthusiasm and charm of some special people.

• The Law of Adhesion: Once a message becomes relevant and personal, it becomes memorable.

• The Law of Environmental Power: The dissemination and popularity of information require a favorable external environment.

These three rules will become more specific when applied to SocialFi products such as Friend.Tech:

Under such a communication logic, we can see more and more people joining Friend.Tech. Players who were still waiting to analyze for a while began to try it out under the continuous influence and attractive adhesion of individual characters, and finally in The bear market has become extremely hot in the context of a lack of hot spots.

At the same time, users in FT also chose to quit due to the decline in revenue caused by the involution of robots, which naturally provided space for a number of imitators to take over this part of the overflow traffic.

It’s clear that Friend.Tech is the first, but it won’t be the last. The imitation disks are making micro-innovations, improving the experience or adding gameplay on the original basis in order to better continue to attract traffic, just like Sushiswap did to Uniswap back then.

Question Ponds, understand Ponds, become Ponds

Friend.Tech has made a good start in spreading the word, but the question is whether it can last like DeFi Summer?

Comparing DeFi’s liquidity mining, although it is also a means to attract users by providing income, and it is also the case that liquidity mining earlier has higher profits than entering later, but in terms of income sources, DeFi products and LP The income is from the handling fees generated by other users when they use it, rather than simply making money from the next one.

Social products such as FT have very obvious Ponzi characteristics, that is, it is easier for early entrants to make money from late entrants, and the latter may bear higher purchase costs.

Therefore, from the perspective of economic design, FTs are not like DeFi in some aspects, but more like StepN, which was very popular at the time. Once no more users join, will the entire chain become unsustainable and eventually fall into a death loop like most GameFi projects?

But don’t forget that StepN, as a consumer-grade encryption application, once successfully broke through the circle and gained extremely high topicality and user volume. Since then, the entire Crypto industry has never seen a similarly high level of consumer applications.

From this perspective, the Ponzi structure in StepN’s economic design actually played a positive role in quickly acquiring customers in the early stages: the first to run will earn first, and if you don’t believe it, you won’t come.

Today, when the infrastructure is homogeneous and plentiful, when everyone is looking forward to the next real consumer-grade encryption application on the social track, it is obviously not the case to completely deny and question the Ponzi structure of Friend.Tech. A practical choice.

Question Ponzi, understand Ponzi, and become Ponzi.

Under the premise of understanding that Ponzi structure and Ponzi scheme are not the same, proper use of Ponzi to attract traffic has become the only way for encryption applications to develop.

In terms of experience, encryption applications are no match for mature Web2 products; in terms of compliance, encryption applications walk the dividing line between black and white; in terms of demand, encryption applications do not have a popular and mandatory need for you.

So, how to make users’ eyes light up and take the step from not using it to using it?

The current answer is probably incentives and benefits. The earlier you come, the more revenue you will earn, and you can use the money-making effect to attract more users. This does have a bit of a Ponds taste, but for Crypto, it is an inevitable part of application development.

Success is also a Ponzi, and failure is a Ponzi.

History shows that applications or projects that only provide more external value without continuing to provide more external value will not be able to attract users all the time, and will either actively develop or passively die.

At this point, Ponds is a means, not an end.

It still remains to be seen whether Friend.Tech or Star Arena can provide more functions and gameplay in addition to revenue, and use practical functions to retain users after successful launch to offset the latecomers suffer problem caused by the Ponzi structure. inspection.

The grand scene returns?

Can Social Ponzi recreate the glory of DeFi Summer? The author believes that it is more difficult in the short term.

First, the macroeconomic environments in which they operate are different. In 2020, the Federal Reserve cut interest rates twice to 0 in March and launched a quantitative easing (QE) program totaling US$700 billion. The flooding also caused a boom in the crypto market. You can also see from the chart below that the maintenance period of low interest rates coincides with the time period of DeFi Summer.

Now we are facing tightening liquidity, the withdrawal of hot money and the Federal Reserves interest rate hike cycle. VCs are also throwing olive branches to the AI ​​industry. SocialFi does not have the same relaxed environment as it did back then if it wants to continue to be hot.

Second, their sources of income are different. As mentioned earlier, the income from DeFI products and LP is the handling fees generated by other users when using it, rather than simply making money from one company to another; and Friend.Tech’s current Ponzi is very obvious, and due to the existence of automatic robots As a result, the cost of latecomers has risen sharply. This is not a very healthy money-making model for users, and is more of a zero-sum game.

Once there are no continuously updated features and more players enter, the fortress is more likely to be breached from the inside.

Finally, the two have different levels of demand. DeFi was born for finance, and the product itself is oriented to how to earn income more freely, more efficiently and more conveniently, which to a certain extent is a rigid need for transactions;

The focus of SocialFi is theoretically on Social rather than Fi. In terms of revenue, ordinary users have no urgent need to choose an encrypted application that is obviously inferior to mainstream social software in terms of functionality and experience. Fi will overwhelm Social in the short term. It cannot be changed, and it is more likely to disintegrate after the speculative effect subsides.

But it is undeniable that today’s social Pond’s is successful in acquiring customers, and the functions it presents are by no means the ultimate form.

Rather than expecting them to be as prosperous as DeFi Summer, it is better to expect them to create a prosperous scene in a new way.