Friendtech's fall from grace and rebirth on the SocialFi track

Preface

"I watched him build a red mansion, I watched him entertain guests, and I watched his mansion collapse."

Friendtech was previously launched on Base and quickly gained attention in the Web3 field. At its peak around September 14, 2023, daily fee income reached $2 million. The team sold 19,477 ETH from December 2, 2023 to June 11, 2024, with a total value of approximately $52 million, but the price of its Friend token has plummeted 95% since its launch, and the current daily trading volume is only $180,000.

I will not elaborate on Friendtech here. Unlike the "sharers", the author of this article would like to use the perspective of a "celebrator" and use an inappropriate expression, "Those who carry firewood for the public should not be allowed to freeze to death in the wind and snow", to highlight the heroism of the Friendtech team, even though the team has received tens of millions of dollars in fees.

In the crypto industry where Ethereum’s decentralized infrastructure is orthodoxy, Friendtech once wanted to break away from L2 - Basechain and turn to Solana, which is more application-friendly. However, history will not give Friendtech a second chance to choose. Without Ethereum’s DeFi atmosphere , the team might not have come up with such a small and beautiful asset issuance protocol , and even Pumpfun would not have appeared so early . Perhaps this is the significance of our exploration of its impact on the Web 3 social track . After all, the economic model of unilaterally launching liquidity , most people today do not understand its innovative significance .

Friendtech and its clones

When Friendtech was building , it was crowded with people and traffic . Various public chain foundations , top project owners , and well-known VCs all came to incubate its imitations , and it was the talk of the town . The crypto industry has such a " tradition" because the industry is full of speculative and short-sighted "smart people". After the "sharers" chewed the essence, the track began to decline. Perhaps it is more difficult to protect innovation in the decentralized world, and VCs also play a role in fueling the flames.

Back to the product itself, KOL is the first stop for current Web3 project parties to contact users, and to a large extent it is also the first channel for users to reach cutting-edge projects. Products that tokenize KOL influence or social relationships cater to the most direct needs of the mainstream crypto group . At least, projects that allow KOLs to make profits at zero cost can basically cover every corner of the crypto community without marketing and promotion. But this is also the problem with FT's design. Let KOLs open the market and users pay the bill, and many of the big Vs who are strong in Bro have suffered losses.

Let's first briefly review the FT formula, P = K²/C+ D (C and D are both constants), and break down the formula parameters:

The square of K and the constant C : affect the price curve (tangent slope), corresponding to the price difference between P(X) and P(X-1) in the figure below. If the square becomes cube (limited by Ethereum smart contracts, non-integer exponential operations are not supported), or the constant C decreases, then the P value will change more steeply as users buy (prone to generate Fomo emotions), which is reflected in the purchase game strategy. The steeper the curve, the better the return expectations of users, but it is also easy for robots to preempt transactions, and the costs are borne by latecomers. As the purchase price increases and the number of takers is limited, the expected rate of return decreases, affecting user entry and the model is unsustainable.

If a higher capacity is needed to flatten the curve, the exponent can be lowered , a coefficient less than 0 can be added , or C can be enlarged .

Constant D : Amplification will raise the base price of P, increase the user threshold, and also lead to a decline in the wealth effect.

Friendtech will also face the "MEV problem" of robots. Robots have the advantage of contract monitoring and can buy newly issued keys at extremely low prices. Although there are many solutions on the market to manage robots, such as increasing D to raise the purchase threshold, setting up a slowing price curve on the left, pre-sales, etc., there are still limitations.

There are more than 10 imitations of Friendtech with products and strong backgrounds. Among them, the two main imitations, SA and TOMO, have made some adjustments to the price curve formula in order to reduce the purchase cost while maintaining attractiveness. Secondly, the native governance tokens of the public chains are different, and the "C" parameter in the formula is converted with the exchange rate of ETH:

l SA adjustment: SA adds linear terms and constant terms on the basis of quadratic terms, and reduces the coefficient of the linear term. This adjustment makes the price curve flatter, and the initial price rises slightly, but the overall change is not obvious.

l TOMO adjustment: TOMO adjustment is relatively simple, it just reduces the coefficient of the quadratic term, which directly leads to a slower growth rate of the curve.

Due to the slowing curve, SA and TOMO have lower prices than FT with the same supply of keys. On the one hand, lower prices help attract more users and expand market share. On the other hand, a lower growth rate may weaken user enthusiasm and affect the long-term development of the platform.

PumpFun also relies on Bonding   Curve ( BC ) is gaining momentum . The core of the BC curve is that the trading market can obtain unilateral liquidity support . Users interact with smart contracts . Although the trading experience is relatively rigid and the real-time trading price deviates from the market value , unilateral liquidity builds a runway for the takeoff of all assets . DeFi needs bilateral liquidity to be configured into trading pairs.

From social relationship tokenization to social asset issuance

The above-mentioned imitations are all from the perspective of curve parameter adjustment, supplemented by a rate-friendly mechanism. The main business is still the tokenization of social relationships. There are currently two problems with tokenization . One is that social relationships do not generate expected and visible cash flows , so the Key has no value support . The second problem is that the post-transaction scenario still returns to the Web 2 platform , although Friendtech has also done some exploration on information flow . The author learned that the DeTikTok project uses Bonding Curve to explore the issuance of social assets. Some designs are quite interesting. With permission, some designs are shared in the article.

1. First of all, the product is issued for social assets. Although it is not as easy to operate and market as the tokenization of social relationships, it has been endowed with the attributes of a key from the beginning, and its vitality may be longer than that of existing keys.

2. Due to the diversity of KOL communities, especially in terms of purchasing power, DTT supports KOLs to start Bonding   Curve is a customizable parameter such as exponent and denominator . KOLs can decide the steepness of the curve to match the purchasing power of their own community while balancing the potential value of social assets .

3. Friendtech’s social relationship tokenization, in theory, is a perpetually traded curve, while DeTikTok’s social asset issuance will have a contract liquidation point, which can be automatically triggered, such as when the transaction fee reaches the initial set value.

The specific operation process of DeTikTok is as follows :

1. KOL customizes curve parameters for social asset issuance and sets contract termination conditions, such as when the transaction fee income token reaches a corresponding value of 20,000 USDT.

2. The contract starts trading according to custom parameters. Before the contract is terminated, the Key transaction refers to the existing FT products, and players can arbitrage and buy and sell.

3. When the handling fee income reaches the preset amount , the contract terminates the transaction , takes a snapshot of the Key holding address , and executes social asset distribution .

4. Then, according to the last-in-first-out principle , users can exit in reverse order according to the order in which the Key was purchased. This ensures that those who enter at a high price can exit at a high price , avoiding the serious exit stampede that is common in existing FT products .

In addition , since the holders of the Key have the expectation of social asset distribution , even if they sell for arbitrage in the initial stage , if the attractiveness of the social assets is strong enough , they will eventually buy back the Key to obtain the qualification for social asset distribution and promote transactions . The social assets can be NFTs , white tickets or even token shares .

Users can eventually retrieve the assets in the contract according to the order in which they purchased the keys , which means that the eligibility for the distribution of social assets is similar to a second-order function of the transaction fee , which increases the attractiveness of the game and provides protection for its assets .

But in my opinion, DeTikTok has fewer permissionless and trustless features.

) is designed, and due to the industry downturn and other reasons, its products are not in a hurry to be launched on the market. The reason for taking DeTikTok as an example is that it represents a new exploration in the social track, but with the current developed infrastructure, influencers such as KOLs have a lot of automated platforms or tools for asset issuance, and the social track currently has no new conditions for an explosion.

Conclusion

The current market perception of Friendtech is that it has failed to attract new users and keep early users engaged and satisfied. Social platforms should focus on building long-term sustainable products and strategies rather than pursuing short-term profits. Prioritize lasting solutions rather than extracting market liquidity through fee mechanisms. Without a sustainable value proposition, hype alone will lead to rapid user churn and huge disappointment.

Understand SocialFi from the perspective of production relations and productivity. Production relations depend on the development of productivity. When applied to the crypto industry, this means not to use production relations to transform Web2, but to use Web3 production relations to empower new productivity. This is also the reason why many TwitterFI, TikTokFi and YoutubeFi have not been successful. At the productivity level, there is no new innovation to meet the needs of users and creators, and production relations cannot be established.

In a market environment where the crypto industry has not yet been widely popularized and a small number of high-net-worth users are concentrated, the social products that attract users' attention are short-term wealth utility products such as Friendtech. This situation is expected to continue for several years. Social media is a way of social interaction, self-cognition and information acquisition. It meets the needs of users for a sense of belonging, self-expression, information acquisition, emotional support, entertainment and career development. It requires a certain scale of users to form positive feedback before it can be created. At present, the user base of Web3 is small, and it is difficult to gather a large number of user needs to form a composite product.

FT has its epoch-making positive significance . The rise of the product is supported by multiple conditions and has successfully formed a threat and challenge to the Web 2 social media platform . When a whale falls , all things come to life. FT has also accelerated the arrival of Pumpfun . New Web 3 social products will continue to emerge . The industry and builders need patience and perseverance . Finally, I wish you all a happy holiday .