friend.tech is so unpopular, why is FRIEND still being promoted?

Original author: Lucy

On May 4, friend.tech officially released version V2 and airdropped FRIEND tokens. One point can be exchanged for one FRIEND. For a time, this "social star" who had disappeared for half a year reappeared in people's vision, and its token FRIEND exceeded 100 million US dollars in just a few days.

The original imitations have all ended, and the points trading is "no one cares"

After friend.tech went online in early August last year, celebrities such as ZhuSu and crypto KOL Adam Cochran joined and started trading. Then on August 19, Paradigm publicly admitted that it participated in the seed round of investment in friend.tech. As a result, friend.tech came into the public eye and set a legendary record of 580,000 transactions in a single day.

No matter how good the friend.tech data is, it cannot escape the fate of SocialFi being a "flash in the pan".

After only half a month, friend.tech completed only 25,000 transactions per day, a decrease of about 95%, and its daily revenue dropped from $1.7 million to $170,000. Subsequently, the founder withdrew coins, robot accounts rushed to make profits, and the frequent changes in the points rules made the community user experience unsatisfactory. After a large number of real user accounts were misjudged as robots, friend.tech also began to go downhill.

Previously, various public chains including BTC, Sloana, BNB, Polygon, Mantle, and AVAX have launched their own "FT imitations", and even the Base chain on which FT relies has also seen Words.art and Pal imitation projects. Although each imitation claimed to have made innovative changes to FT, after the "fall" of friend.tech, they also disappeared from the public eye.

In addition, friend.tech points are set at 100 million in total, 90 million of which were allocated during the testing period, and the remaining 10 million were allocated in the v2 version. However, within 2 months after the end of the testing phase, friend.tech points had a cumulative transaction volume of 2.73 million US dollars on the Whales Market.

Currently, according to Whales Market data, the MERL points transaction volume of Bitcoin L2 protocol Merlin Chain reached 3.87 million US dollars, the IO points transaction volume of depin protocol io.net reached 4.87 million US dollars, the W points transaction volume of cross-chain interoperability protocol Wormhole reached 5.5 million US dollars, and the PORTAL points transaction volume of game Portal reached 6 million US dollars.

Therefore, for a project that relied on viral marketing to ignite the SocialFi track, 2.73 million is not outstanding. It can even be said that at that time, friend.tech points itself was not as eye-catching as this emerging points trading market.

The transaction volume exceeded 100 million in one week. What is the charm of FREIND?

Judging from the data performance alone, friend.tech has indeed "cooled down". But what's interesting is that compared to the bleak points market, FRIEND has achieved a breakthrough of US$100 million in one week. According to dune data, as of the time of writing, FRIEND's transaction volume has exceeded US$3.7 billion, which can be said to be a world of difference.

The most "Base" token

On April 5, the Friend.tech official Twitter account announced, "Starting next week (April 8), linking Twitter to your Friend.Tech account will become optional. New users will be able to choose any unclaimed username when registering." The official Twitter account also explained that this is in preparation for v2, to open Friend.Tech to new audiences outside of Twitter, and allow existing users to link their Twitter to new accounts before v2 is launched.

V2 means that the airdrop is really coming, and for a time, friend.tech's net inflow surged. According to Dune data, friend.tech had a net inflow of 1,300 ETH on April 8, the highest net inflow since September 29, 2023; at the same time, the trading volume increased to US$7 million. Previously, the average trading volume in 2024 was US$1 million; TVL rebounded to US$42 million.

On May 4, friend.tech officially released version V2 and airdropped FRIEND tokens. One point can be exchanged for one FRIEND. In addition to the 100 million points initially established, friend.tech stated that it will also allocate 12 million FRIEND incentives to LP providers in the next 12 months, that is, the total supply of FRIEND will be at least 112 million.

With tokens, there are more gimmicks to make money. As a social protocol of the Base chain, FRIEND is also known as the most "Base" token. Since Base claims that they will not launch tokens, this may leave room for FRIEND's status to grow.

On the one hand, friend.tech has set up a DEX "Bunnyswap" dedicated to FRIEND transactions, on which FRIEND/ETH liquidity can be provided. Users need to deduct a 1.5% exchange fee when exchanging in the FRIEND/ETH pool, and they also need to pay 1.5% when trading Club Key. These fees will be shared by LP providers (in the form of FRIEND).

Simply put, providing FRIEND/ETH liquidity on friend.tech can obtain three kinds of benefits, including 1.5% exchange fee (current APY is 194.15%), 1.5% Club Key transaction fee (current APY is 21.63%), and sharing of 12 million FRIEND incentives (current APY is 66.39%).

Currently, the address that provides the most liquidity on friend.tech is owned by Taiwanese singer Huang Licheng. According to Dune data, he has purchased more than 3.52 million FRIEND in total. The second is the address starting with 0x e 3879 b, which provides 650,000 FRIEND in LP. Christian 2022.eth, which ranks fifth, is a partner of NextGen Digital Venture and provides 600,000 FRIEND in LP.

On the other hand, as the first project to issue tokens, SocialFi is also the first project to airdrop 100% of its tokens to users, which obviously gives friend.tech more confidence to motivate users. In addition to holding various events on social media (such as selecting the best analysis copy) to airdrop tokens to users, it even "ridicules" other projects that have not issued tokens.

Club gives FRIEND functionality

But just airdropping FRIEND is not enough to support its popularity. After all, you can sell the coins as soon as you get them, and no one can force you to continue to participate in the protocol interaction. However, friend.tech did it.

friend.tech was very "smart" in setting limits on the airdrop claiming conditions. At first, you can only claim 10% of FRIEND, and then you must join a club and follow 10 people before you can claim the remaining 90%. However, these requirements were not prompted in the pop-up window of the application, and many people said that they could not claim the airdrop even if they joined the club.

Club is a new feature of V2. In the past, the room owner could see all the messages sent by other people, but other people could not see each other's messages. Club is similar to a paid group, which is to transfer the 1 v1 "chasing star" mode of V1 to 1 vN. Each account can create a new Club for free, which means having the first Club Key for free. People who join the group later need to pay a higher price to buy Club Key, and transactions only support FRIEND tokens.

Key holders can vote for the president of their club at any time. The president of the club is responsible for managing the club and selecting moderators. Friend.tech seems to be interested in stimulating the creation of new clubs or allocating additional rewards to the founder or president of the club.

In addition, the authorities created Money Clubs, which enable groups to manage shared treasuries and mint tradable on-chain collectibles, meme coins, and a host of other media to generate additional income for the group, all of which can be traded on its native DEX.

In other words, Club provides functionality for tokens, rather than a random "governance voting" use case. In addition to buying and selling Club Keys, creators can also earn money by holding them. According to dune data, as of the time of writing, the number of Clubs has reached 223,075, and the total transaction volume of Club Lifetime has reached 25,886,290 FRIEND.

How far can Club take FRIEND?

The first generation of friend.tech focused on trading a certain KOL's key, distributing the Ponzi to each KOL, and limiting the number of people by setting a high purchase price for the KOL's key through the model. Compared with Ponzi projects involving thousands or tens of thousands of people, this model is obviously more operational and controllable for a small-scale Ponzi project centered on a KOL. In the words of the industry, a small circle is more likely to create "consensus."

Simply put, V1 is essentially a Ponzi scheme derived from the fan economy, and it has failed to form a platform that strongly binds content production and social relationships. So what about V2's Club?

Is FRIEND the new Ponzi?

The fundamental reason for the failure of V1 lies in the price curve, which limits the number of people by setting a high purchase price for the key to which the KOL belongs, which greatly increases the entry threshold for newcomers. In order to solve this pain point, Club changed the pricing formula of the key and launched the standard curve and the casual curve based on the original dedicated curve.

Under the Standard curve, the price of the next Key is S^2/100 (in FRIEND), where S is the number of current Keys. The price of the Exclusive curve is 10 times that of the Standard curve. According to the formula, when the number of Club Keys reaches 50, the price of each Key is 250 Friends (about 500 USD), which is similar to the KOL curve in the V1 version.

The latest Casual curve is 100 times cheaper than the standard price curve. In this way, the introduction of the new curve standard can effectively solve the problem of entry barriers, and friend.tech officials also encourage users to use the Casual curve to create a Club with more than 1,000 members.

The new curve design is indeed capable of leading friend.tech to continue operating, but the key lies in whether the handling fee can be reduced. Previously, only 20% of the accumulated amount of V1 Key buying and selling flowed into KOL and FT project parties respectively, and friend.tech protocol took 80%.

According to "Friend.tech Economic Model Expansion: What kind of price curve does SocialFi need", the "MEV income" earned by Bot and the handling fees earned by the protocol will eventually cause a net outflow of friend.tech funds, and the book yield of Key is leveraged, and its book value is three times the actual TVL of friend.tech (all from user deposits). Once TVL goes down or even sideways, the impact will become extremely strong.

However, Club has reduced the protocol commission, and only about 2%-3% of the transaction amount will flow into the friend.tech protocol, which reduces the friction cost of trading keys, and repeated transactions will be much more cost-effective for degen. On May 16, friend.tech officially launched President rewards and Club Key transaction rebates. Both President and Key traders will receive 0.5% of the transaction amount, which can be collected in the wallet. These will be deducted from friend.tech's fee share, so the overall fees and FRIEND ＜＞ ETH LP rewards will not be affected.

It can be seen that whether it is a flatter curve design or a reduction in the protocol commission, V2 has indeed made changes to V1 with the intention of lowering the entry threshold. Moreover, in V2, users can also continue the KOL Key trading experience of V1.

According to calculations by friend.tech in-depth player @0x LuxeCrypto, his personal Key holder will receive 25% of all fees generated by all Clubs he created, and his Club Key holders will obtain a share of the fees generated by Clubs through various distribution channels, that is, the income is relatively reduced, but the group chat function can bring greater network effects to the users themselves.

In addition, some community members observed when using the Base Scan contract interface that friend.tech will launch some new features, such as changeBestFriend and changeBestFriendfee. It can be speculated that this feature may be used to allow anyone to add a best friend, so that less or no fees can be paid when trading keys.

“Club+meme” may be a bullish catalyst

In fact, there is another factor that makes Club popular - meme.

Another key point that attracts users to Club is that Key is transferable, which leads to more gameplay. For example, the homeowner can buy a large number of Keys at the beginning, and then transfer their Keys to other Club members. The founder of ArbDoge.AI said that he would use 20% of his personal income from the project to regularly repurchase his Club Key to empower the Key.

In fact, this is the logical development of meme coins. Some community members visualized friend.tech as: participants who were searched by human flesh, indelible meme coins and ample liquidity.

In addition, friend.tech said it will also launch a new feature called Memeclubs, which, combined with the recent meme hype, is enough to excite the community and fill it with imagination. Currently, many memecoin communities from other chains are trying to enter the Club, such as PUPS, WZRD (community startup), Bobba Oppa (SOL shitter).

And interestingly, during the quiet period of friend.tech activities, meme coins swept the entire industry. After the market rebounded and the bull run led by memes ended, the Friend.tech editor also complained, "It's crazy that we missed the opportunity to deploy v2 during the bull run for several weeks."

Even the editor of friend.tech tried to operate his own community in the form of memes. Before the release of V2, he used confusing cx rhetoric to "show his presence" many times, mostly saying things like "friend.tech users are all rich people, poor people should not get involved with friend.tech", and even hinted at and criticized competitors such as Farcast, causing public outrage.

An article from Bankless argues that each blockchain fosters its own unique form of SocialFi, such as NFTs on Ethereum and meme coins on Solana. Meme coins have long been compared to NFT collectibles because they both create the same unique social network, such as dogs with hats and the most typical WIF, whose holders appear as a unique population.

The problem was that they were fragmented, with the lack of a unifying platform hindering a cohesive growth trajectory and causing many to view them as separate trends rather than part of SocialFi. Friend.tech changed that, and it was the meme that swapped out Friend.tech's SocialFi for a sillier, and arguably more entertaining, type of thing.

Can FRIEND continue to rise?

If we only look at the social elements, the chat page of V2 has not changed much, and the administrator function designed for group chat does not actually have many new ideas.

However, the FRIEND transaction volume is showing a significant downward trend, currently around 300,000, which is a significant downward trend from the high of $6.8 million on the first day. The number of newly created clubs is also declining. Although this may be a sign of the maturity of the club and people integrating into their favorite groups, it is after all the biggest update feature of V2, which may indicate a lower demand for this new mode.

Additionally, FRIEND liquidity has stagnated, and liquidity is critical to token growth and price action. While there are considerable incentives to provide liquidity for FRIEND on friend.tech’s native DEX, liquidity for the token appears to have plateaued, potentially signaling a ceiling to price action.

Conclusion

According to Galaxy statistics, from November 2023 to January 2024, during the period of silence of friend.tech, user transaction activity and the number of daily active users of the DeSoc application were also stagnant. It was not until February that encouraging signs of growth began to appear. The increase in trading activity was partly attributed to the recovery of Farcaster users. In addition to the Frame application, the Meme coin craze brought by DEGEN has also become a major bullish factor for Farcaster.

However, the increase in Farcaster's daily active users is mostly due to their desire to receive airdrops from sub-communities. Similarly, the hype of friend.tech V2 is also due to FRIEND tokens. From this, we can see that SocialFi still focuses on "Fi" in essence, but is issuing tokens really a good way to solve SocialFi's problems?

a16z has previously published a series of articles on whether or not to issue tokens. The article believes that tokens are one of the most powerful tools, but also one of the products with the greatest risk to market. However, launching tokens too early is also the most common mistake made by projects in web3. friend.tech changed the airdrop information several times before issuing the token, and after issuing the token, the backend was overloaded due to technical failures.

Previously, a VC said that DeSoc may become one of the mainstream narratives this year, and from the current social projects, friend.tech is definitely one of the most noteworthy projects. But whether FRIEND can continue to be hyped depends on how friend.tech ensures that users are motivated and are more willing to choose their applications instead of other applications such as Twitter, Farcaster, Lens, etc.

With the release of FRIEND, friend.tech did not attract the same level of attention as before. Some community members speculated that V2 might just be another carefully planned by the team, intending to collect all negative feedback, iterate, and then release a new version of the application.