Friend.tech: A Preliminary Analysis of the Newcomer in the SocialFi Arena

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LD Capital
LD Capital
Sep 07, 2023

Friend.tech: A Preliminary Analysis of the Newcomer in the SocialFi Arena

 

 

1. Introduction

Friend.tech is a decentralized social platform built on the second-layer network, Base Chain, launched by Coinbase. It integrates closely with Twitter to acquire users’ Web2 identities, which allows users to potentially profit based on this identity. Within this platform, each user can be tokenized, and their influence can be directly priced by the market.

 

2. Product

At its core, friend.tech operates on the fan economy. Before using the app, users must pre-deposit 0.01 ETH, which serves as the main currency within the application used to purchase shares of other users. These “shares” are a tokenization of the user’s influence. For purchasers, the purpose of buying a share is to acquire the right to converse with the user whose share has been bought. After a purchase, one-on-one chats can be initiated. To prevent spam, each holder can send three messages, then wait for the other party to respond and reset the limit.

Upon entering the app, users can see the currently most popular users on the homepage, or search for users they are interested in by pressing the “Explore” button and buy their shares. The initial price of each user’s share is set based on Twitter data, and there’s no upper limit to the supply of shares. The price of the shares will fluctuate based on market demand, meaning the more popular a person is, the more their shares will be bought, and hence their shares become more valuable.

Twitter users @functi0nZer0 and @9527yyds_1 have detailed the product’s pricing model, where the price exponentially increases as more shares are sold.

From the chart below, it’s evident that the price slope is quite steep. Therefore, in a short span, the token price can reach a significantly high position. Likewise, if people start selling, the price will rapidly drop.

For social influencers (KOLs) whose shares are bought, they receive a 5% “subject fee” for each buy or sell of their share. If a KOL wishes to earn more, their token needs to have a higher trading frequency. But according to its pricing model, the higher the trading frequency, the quicker the price rises. However, this brings a problem: without any intrinsic value and in cases where fan loyalty isn’t strong, the individual influence token could quickly face a situation where its price won’t rise any further. Observing the current app’s top influence token trading, the highest KOL token holder is only 168, but the token price has already risen to 2.78 ETH.

III. Financing

Friend.tech announced on Twitter that Paradgm participated in its seed round of financing, though the amount was not disclosed. Moreover, this year, friend.tech also collaborated with Paradigm to develop new online social interaction tools.

Source: Twitter

According to a Twitter user, friend.tech has completed its Series A financing with a valuation of 50 million USD. This round of financing comes with token authentication, suggesting that friend.tech is likely to issue its own tokens.

Source: Twitter

IV. Business Data

1. Users

As per the Dune Analytics dashboard, Friend.tech has a cumulative transaction count of approximately 626,000, with 44,000 on the buying side and 16,000 on the selling side. After Friend.tech began distributing weekly points through airdrops on August 18th, there was a significant increase in the number of both buyers and sellers.

Source: Dune Analytics

From the transaction count, it’s evident that on-chain transactions became more active after August 18th.

2. Transaction Volume

The following data represents the buy/sell transaction data: Buy-side transaction volume: 8,623 ETH, valued at about 15 million USD. Sell-side transaction volume: 5,585 ETH, valued at about 9.95 million USD.

From the asset buying and selling data, the current trading volume is around 49,000, of which the buying volume is 533.9 ETH and the selling volume is 352.6 ETH.

3. Protocol Value

The current total value locked (TVL) in the Base chain is 178 million USD, while friend.tech has assets valued at 6.24 million USD, ranking 9th on the chain with a 3.5% share. As a newly launched social application, its asset growth rate is considered fast.

Source: defillama

Based on the Dune Analytics data, friend.tech’s cumulative transaction volume reached 21,000 ETH, valued at approximately 35 million USD. When personal influence tokens are traded, a 10% transaction fee is charged. Of this, 5% is distributed to the purchaser, and 5% goes to the protocol. Currently, the protocol’s revenue stands at 973.5 ETH, valued at about 1.63 million USD.

Source: Dune Analytics

V. Project Progress

On August 18th, the official friend.tech announcement on Twitter stated that they had distributed the first points airdrop to 44,000 users. In addition, the team announced that they would distribute 100 million points over a 6-month testing phase, with airdrops occurring every Friday. These points will be recorded off-chain and will have a special purpose after the test phase.

Friend.tech mentioned that the airdrop would consider user activity up to every Thursday, with the criteria updated weekly. Users are advised not to employ any specific method to earn points. If issues arise, friend.tech reserves the right to adjust previous points distributions.

Based on the percentage of tokens in supply and FDV (Fully Diluted Valuation), some users have made predictions about the value of the points: if the FDV reaches 20 million USD and the airdrop represents 10% of that value, each point would be worth $0.2.

Source: Twitter

Taking the current top token holder @Cobie as an example, he received an initial airdrop of 1.1 million points. Based on a Series A valuation of 50 million USD, if the airdrop is 10%, then each point is worth $0.5, making Cobie’s first points airdrop worth 550,000 USD.

Summary

Friend.tech is a social application centered around the fan economy. Currently, its features are relatively basic. From the token pricing model, its mechanism design appears quite driven by FOMO (Fear Of Missing Out). With strong expectations around the airdrops, its current popularity is on the rise. The number of active addresses on friend.tech is growing rapidly, and the value of locked assets on-chain is also surging. However, if we return to the core of the social product, and it fails to truly connect fans with KOLs (Key Opinion Leaders), the product’s growth potential may be limited and unsustainable.

 

LD Capital is a leading crypto fund who is active in primary and secondary markets, whose sub-funds include dedicated eco fund, FoF, hedge fund and Meta Fund.

LD Capital has a professional global team with deep industrial resources, and focus on develivering superior post-investment services to enhance project value growth, and specializes in long-term value and ecosystem investment.

LD Capital has successively discovered and invested more than 300 companies in Infra/Protocol/Dapp/Privacy/Metaverse/Layer2/DeFi/DAO/GameFi fields since 2016.


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