The Emerging Force in the Social Media Industry: The Rise and Challenges of the Decentralization Social Platform Friend.tech

The 2024 Global Social Market Report shows that the social media industry is experiencing significant expansion. Its market value is expected to increase from $219.06 billion in 2023 to $251.45 billion in 2024, with a compound annual growth rate of 14.8%. Approximately 62.3% of the global population uses social media, spending an average of more than two hours per day on it.

Decentralized social media (DeSoc) provides innovative ways for creators to monetize content and manage online relationships. It promises to improve privacy, security, and gives creators 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 advancements in Web3 technology. Friend.tech emerged as a decentralized, blockchain-based social network aimed at tapping into this emerging market. The platform stands out by addressing common issues in centralized networks, such as user data ownership, limited privacy options, and content censorship risks.

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.

This article will delve into the platform, examine its token issuance, compare it with competitors, and assess its potential and related risks for 2024.

Project Overview

Friend.tech is a decentralized social platform built on the Base chain. It is closely integrated with a certain social platform to acquire users' Web2 identities, allowing 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.

This project is one of the most successful Web3 applications in the SocialFi sector, achieving the highest income-to-net deposit ratio ever, with revenues exceeding $2 million and net deposits of $33 million in the first month.

The core of this project is based on the concept of fan economy. Users need an invitation code and to deposit a small amount of ETH to start using it. These shares represent a portion of the user's influence. Those who purchase shares can chat one-on-one with the investment target. This setup allows users to connect directly and personally with their favorite influencers. Additionally, these tokens, referred to as "keys" or "shares," can be traded, allowing users to potentially profit from the growing popularity of content creators.

For key opinion leaders (KOLs), they earn a 5% fee every time someone buys or sells their shares, which provides a financial incentive. To increase their income, KOLs need to enhance their share trading activities. An additional 5% goes to the platform, with a total fee of 10% charged for each related transaction.

Despite the significant attention that decentralized social media protocols received last year, they have recently experienced a decline. On-chain data shows that since peaking on September 13, daily activity on the platform has significantly decreased, with 539,810 transactions recorded that day. Since then, interest in the platform has noticeably diminished.

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

Comparison of Friend Tech V1 and V2

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

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

Friend Tech V2 introduces several new features and changes. Notably, users can now receive their $FRIEND tokens, marking an important update. However, this release has faced criticism for a lack of clear information and guidance, particularly 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 the election of a chairman to manage the club and appoint moderators. All transactions within the club use the $FRIEND token, and each transaction incurs a fee of 1.5%. 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 are confused about how to claim their airdrops, join clubs, or even find the clubs they have already set up because the platform does not provide clear instructions or interface hints.

In summary, V1 focuses on achieving rapid growth and revenue through high fees, while V2 aims to enhance user governance and interaction through a 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. Community members pointed out that these developers were also involved in an unsuccessful NFT project. Further scrutiny revealed that one of the developers deleted several social media posts linking to this NFT project and held an official position in a Discord server. 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 a venture capital firm, although the amount was not disclosed, and collaborated with this company to create an online social interaction tool.

Rumors on social media 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 happened.

Controversy

Friend.tech originated from a developer's practice project that allowed users to publish social media posts from a shared account by holding native NFTs. Although the project initially achieved viral success, it eventually faded away, leading to the closure of its main account and website.

Subsequently, the developer and a co-developer launched another Web3 platform where users can mint and purchase images as NFTs, which remain hidden until purchased. However, due to the difficulty of maintaining creator profit returns, the developer ultimately renamed it to Friend.tech. Friend.tech was launched in May 2023, aiming to attract Web3 influencers and creators seeking 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.

Moreover, the sustainability of the platform has also faced serious criticism. Initially, Friend.tech grew rapidly due to its influencer-centric strategy, but as the initial excitement faded, doubts about its long-term viability have deepened. Critics point out that the platform's excessive reliance on influencers is a key vulnerability. Without the active participation of key figures, the value of the platform could decline.

This is the reason for the strategic shift in the V2 update, transitioning from a KOL-centered model to one that focuses more on a broader community model. Nevertheless, questions remain regarding the level of engagement of influential users and the actual value they bring when inactive.

But that's not all; Friend.tech is striving to differentiate itself and retain users in competition with other social platforms and decentralized competitors.

On a positive note, Friend.tech now has its own token, which opens up opportunities for trading and speculation. The project has over 160,000 followers on its social media platform and is actively promoted by some influential figures who encourage others to try the app. This promotion clearly has economic benefits for them, but it also indicates that the project has potential upside.

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

Competitive Analysis: Friend.tech vs Farcaster

Friend.tech started to gain strong support by charging high fees and offering special club features, initially finding great success. However, its popularity has declined, raising concerns about how to maintain user interest over the long term. In contrast, Farcaster does not have its own token and uses the DEGEN token, which many accept in its ecosystem. This approach has helped Farcaster build a loyal community reminiscent of traditional internet forums, leading to steady growth 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 to promise more lasting success. This is because it has loyal users and various uses 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 attract community participation. Its current market capitalization and fully diluted valuation are $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------follow ten people to receive 10%, the remaining 90% requires joining a club. This ensures that token distribution supports active ecosystem participation.

$FRIEND can only be traded within the Friend.Tech system, which uses a local exchange feature with a 1.5% fee. This promotes liquidity and ensures the platform benefits from fee revenue, but it also requires users to trust the stability of the platform.

The Club feature on Friend.Tech is similar to a micro-government, allowing users to manage and customize their clubs, from setting names to economic parameters. This structure supports Decentralization governance, with club leaders and moderators elected by key holders, reflecting a DAO-like transparency.

Despite maintaining a user interface similar to V1, the introduction of the $FRIEND token and club adds a new level of engagement and monetization. Transactions within the club are subject to a 1.5% fee, which is distributed between liquidity providers and the platform, helping to sustain the financial health of the ecosystem and reward active participants.

![Friend.tech Research Report