On August 10th, Base on-chain social application friend tech caused a sensation in community, with users clamoring for invitation codes to join. Tens of thousands of users poured into this new L2 network. However, this good fortune didn’t last long; the popularity sustained for less than three days before friend techs’ activity took a cliff-like dive. Just when everyone thought it had silently exited the stage of history, friend tech boldly returned with news of a seed round of financing from the top crypto vc, Paradigm. Additionally, with the first distribution of its points, users who had originally left rapidly flowed back, creating a new trend on social media and attracting an even larger influx of new users.
According to the CryptoKoryo dashboard, as of 19:30 on August 19th, in roughly 10 days since its inception, friend tech has achieved a volume surpassing 11k ETH, with the number of unique users exceeding 39k and a cumulative total of over 51.8k transactions. The effect of Paradigm’s involvement has been sufficiently strong; after the financing news was announced, friend techs’ active user count saw a swift increase, with over 1.7k buyers in just one hour, marking a new historical peak.
(Source: https://dune.com/cryptokoryo/friendtech)
Background
According to yuga.eth, a senior software engineer at Coinbase, friend tech was built by Racer (@0xRacerAlt), the chief developer of TweetDAO and Stealcam. This statement was also covered by CoinDesk.
Both TweetDAO and Stealcam are explorations of decentralized social network and have similarities in design. Thus, they can be considered as the precursor applications to friend tech.
TweetDAO was launched around April 2022. Its basic principle is that the DAO creator sells an NFT called Eggs, allowing the holder to post one tweet per day from the DAO’s Twitter account without any text content limitations. As more NFTs are sold, the floor price of the NFT also rises. Currently, the official TweetDAO account has been deactivated, and there’s limited information available on the website.
After TweetDAO, Racer teamed up with another developer, shrimp (@shrimppepe, who is also a co-founder of friend tech), to create Stealcam in March of this year. Stealcam is an image-based social application on Arbitrum. Its basic principle is that users can take photos, upload them as NFTs, but the image of the NFT is hidden and needs to be ‘stolen’ before it can be ‘revealed’. Other users need to pay a fee (to ‘steal’) to have the right to view the image (‘reveal’). However, only the most recent user who pays the fee has this right, implying that the right to view has a time-sensitive nature. There’s also a possibility that users might pay the fee and not get to view the image if another user pays the fee again in the meantime. The number of times a fee can be paid for the same NFT is unlimited. As the number of ‘steals’ increases, the floor price of the NFT also becomes more expensive, with the difference in price being distributed among the creators, users, and the protocol. Currently, the official Stealcam account has been deactivated, but the website is still in use by some.
It’s evident that the social products Racer builds have strong financial characteristics and also feature a Ponzi structure. Moreover, after the launch of Stealcam, it received high praise from Base’s core developer, Jesse Pollak, which might have paved the way for friend tech’s decision to choose Base.
Introduction
From the onset of accessing the application, friend tech appears very streamlined. IOS users can simply open the official website on their phones and add it to their home screen, without relying on any third-party downloads. Users need to obtain an invitation code, link their Twitter account, and inject at least 0.01 ETH into the Base network to access the application. The essential functions of friend tech are not much different from WeChat groups or Telegram groups, but the organic process of entering and leaving group chats is the core feature of friend tech. Users can choose to join a specific group and acquire a share of the group by paying its base price. If they wish to exit the group, they can sell the group shares they own. As the number of people choosing to join a certain group gradually increases, and as the total quantity of group shares grows, the base price of each group share also rises. This suggests that joining a particular group is not only for social interaction but also holds potential investment value. Purely from an investment perspective, joining a group is an investment in that group and its owner. Therefore, speculative users tend to buy more shares of groups they believe have potential, or their own group’s shares, especially in the early stages.
Economic Models
The economic model of friend tech primarily encompasses the group share growth model, fee structure, and point incentives.
friend tech’s group shares begin growing from 0. The only variable influencing the price of each share is the supply of issued shares.
Price in ETH = supply ^ 2 / 16000
(Source: https://1drv.ms/x/s!AkA_OhBaQXjAiEbRNPrKm-YQH7Yi?e=vVne4E)
As the total supply of issued shares continuously rises, the net price difference between buying and selling shares will grow larger, but the price spread rate (spread/selling price) will decrease. The reason for the existence of this spread is straightforward: since share growth starts from 0, buys inevitably precede sales, and sellers always lag behind buyers. At the Nth share, the selling price equals the buying price at the (N-1)th share. For instance:
At the 1st share, buy price is 0.0000625 ETH, sell price is 0 ETH.
At the 2nd share, buy price is 0.00025 ETH, sell price is 0.0000625 ETH, spread rate is -300%.
At the 3rd share, buy price is 0.0005625 ETH, sell price is 0.00025 ETH, spread rate is -125%.
At the 4th share, buy price is 0.001 ETH, sell price is 0.0005625 ETH, spread rate is -77.78%.
And so forth.
friend tech charges a 10% fee for each group share transaction, of which 5% is distributed to the group share holders, and the remaining 5% goes to the treasury income. As of 20:30 on August 19, within a span of ten days, friend tech’s treasury (address: 0xdd…f742) has recorded an income of 579 ETH, valued at approximately $960k.
Point incentives are crucial for friend tech to transform Twitter users into core app users. It capitalizes on the potential expectations of token airdrops and is equipped with visible points to motivate users. friend tech will distribute a total of 100 million points during the test period of the next 6 months, disbursing them every Friday. These point records are not stored on-chain. On August 19, friend tech completed its first point airdrop. Although the specific rules regarding points remain unclear, volume should be the most significant indicator. Furthermore, community speculations suggest that the points are related to the token airdrops, as Paradigm’s other successful investment, Blur, epitomizes the point game system.
Future and Challenges
At the end of July, Paradigm highlighted decentralized social networking as one of its top ten areas of focus. However, due to the high costs associated with transitioning to new social platforms and the strong first-mover advantage held by centralized social networks, there have been few successful projects in this space. Both Lenster and friend tech are more influenced by financial factors such as airdrops, incentives, and funding than by their intrinsic social attributes.
Nevertheless, the author believes that the private chat scenarios represented by friend tech possess certain objective conditions for success. A prime example is the Alpha community epitomized by the LaserCat community, where buying group shares with ETH is quite similar to buying an NFT Pass card with ETH. Both routes lead to joining a particular community; the distinction lies in the fact that friend tech combines the acts of purchasing and joining a chat group into one, whereas in the NFT format, these are two unrelated actions. Purchasing occurs through NFT Marketplaces like OpenSea and Blur, while chats primarily depend on platforms like Discord. Theoretically, friend tech’s shares could also be in the form of NFTs. The demand for NFT Alpha communities is genuine, and friend tech’s development direction is not to attract scattered users but those with long-term ties. From this perspective, friend tech attracting Discord community users might be of higher quality than direct customer acquisition from Twitter. However, compared to Discord’s extensive features and robust plugin system, what friend tech offers is rather simplistic, which could lead to inefficiencies in daily communication when faced with multiple complex issues. Going forward, friend tech needs to refine its features to enhance the user experience for its groups.
Another double-edged aspect is that friend tech imposes stricter constraints on group size expansion than the capped total supply of NFTs. Comparing LaserCat NFT’s total supply (520) and floor price (3.66 ETH) with friend tech: when the LaserCat group in friend tech holds 520 shares, the buying price for the LaserCat group would be 16.9 ETH. When the LaserCat buying price is 3.66 ETH, the LaserCat group would hold 242 shares, accommodating at most 242 people. On the positive side, this raises a thought-provoking point: if PFP NFTs or NFT Passes are equivalent to friend tech shares, the cultural attributes of a group could be conveyed to non-holders via NFTs. Using a predetermined algorithm, if the joined community genuinely holds corresponding value, it could provide a base price for NFTs, possibly influencing the price discovery process for NFTs.
Reference:
https://www.panewslab.com/zh/articledetails/5upll7es.html
https://www.asxn.xyz/p/friendtech
Twitter: https://twitter.com/WuBlockchain
