In-depth Analysis of the Friend.Tech Social Platform: Token Economic Model and Development Prospects

Summary

Friend.Tech, as a representative application in the SocialFi field, rapidly emerged after its launch in August 2023. The platform allows opinion leaders (KOL) to tokenize and trade their social influence, gaining widespread attention. However, its Token economic model and business strategy also face challenges.

This report conducts an in-depth analysis of the token economic model of Friend.Tech through on-chain data analysis and finds that:

1. The token price has increased exponentially, bringing considerable profits to KOLs, but limiting the size of fan communities. 99.94% of accounts hold tokens between 0-100, with prices generally below 4 ETH.

2. The rigid pricing mechanism has led to a rapid decline in trading volume of high-priced Tokens. The average number of daily trades only reached 7 times on the first day, and has since maintained at 1 time or below. The continued profit outlook of the current model is unclear.

3. The clear arbitrage opportunities attracted a large number of speculators and trading bots, contributing 90.6% of the total trading volume. Only 18.6% of the speculators achieved positive returns, with half of them being obtained by 10.8% of pure speculators.

After comprehensive analysis, we believe that:

1. The sustainability of the Friend.Tech economic model is relatively low. After the price of the Token rises, higher holding costs and lower profitability may hinder user participation. The project team may need to continuously attract new users to maintain activity.

2. The platform may have development potential in social functions. The arbitrage space of tokens can promote users to voluntarily promote. Users are closely connected and are more inclined to reciprocal behavior, setting a good example for the SocialFi model. However, the user experience needs improvement, and the ease of replicating the business model may affect its prospects.

1. Introduction to Friend.Tech

A new attempt at the SocialFi model

As a popular concept in the Web3 field following DeFi and GameFi, SocialFi combines decentralized finance with social media, allowing users to directly gain economic value from social interactions and content creation.

Developer Racer launched the Friend.Tech platform on August 10, 2023, allowing users to trade qualifications for one-on-one private chats with others using cryptocurrency. This model, which directly links social influence with economic value, is very appealing to users discussing cryptocurrency, providing ordinary users with the opportunity to communicate directly with KOLs, as well as offering KOLs a new way to monetize their influence.

Friend.Tech Operating Mechanism

1. Users bind Twitter(X) accounts, each account corresponds to a set of Keys, with no limit on the number of accounts.

2. The initial quantity of each group of Keys is 0, and users can receive the first Key for free to activate the function.

3. Users can purchase others' Keys to become holders and gain the qualification for one-on-one private chat.

4. Users can purchase multiple Keys( including their own ), and can also sell the Keys they already hold to the platform.

Friend.Tech operates on the Base chain ( Ethereum Layer 2), with Keys holding information stored in smart contracts, and transactions paid using ETH. Accounts need to be linked to Twitter to obtain a blockchain address, but it is also possible to interact with the contract directly without the app.

2. Token Economic Model Analysis

rigid economic model

Keys uses a fixed price formula based on total holdings, rather than traditional order book or AMM pricing:

• Users need to pay when purchasing: (n+1)^2/16000 ETH
• Platform refund upon sale: n^2/16000 ETH

In actual transactions, both buying and selling require a 10% fee, of which 5% is given to the creator and 5% to the project party.

Although the price of Keys increases exponentially with the amount held, transaction fees mean that selling may not necessarily be profitable. The holding amount needs to increase by 10.6% to break even, and the total fees paid by incremental users will rise exponentially.

Analysis of the advantages and disadvantages of the economic model

Advantages:

1. Avoid early cold start and price fluctuation issues.
2. Create opportunities for early investors to discover potential KOLs.
3. KOLs can earn generous rewards.
4. The possibility of Keys being infinitely inflated is relatively small.

Potential issues:

1. Fixed pricing encourages buying low and selling high, attracting a large number of speculators and bots.
2. The number of Keys holders has an upper limit, and high-priced Keys are difficult to attract rational fans.
3. The platform's activity decay cycle is short, and high-priced Keys may be worthless.
4. It is difficult to rely on existing users for continuous profits and it is necessary to constantly seek new KOLs to enter the market.

3. On-chain Data Empirical Analysis

3.1 Project Performance in the First Month

Friend.Tech quickly achieved success after its launch. On August 11, it recorded the creation of 17,556 Keys, 136,000 transactions, and over 4,000 ETH in trading volume. On August 21, the daily trading volume exceeded 10,000 ETH, with 525,000 transactions, and the project team earned over 500 ETH in a single day.

As of September 19, the total number of users is 206,706, Keys created are 203,953, holdings are 258,859, transaction volume is 3,049,066, and transaction amount is 139,530.09 ETH.

3.2 Main User Types

• Light participants: individual users with low trading frequency and limited returns.
• Cryptocurrency KOL: Building community value, mainly profiting through protocol sharing.
• Profit-seeking speculators: actively trade popular Keys to profit from price differences.

3.3 Speculator Behavior and Returns

• Speculators ( 21.7% Users ) contribute 78.9% of trading volume and 88.4% of transaction amount.
• Only 18.6% of speculators achieved positive returns, among which 10.8% did not link their social accounts.
• 186 suspected robot users completed 27,648 "sniping" trades, achieving a profit of 2553.84 ETH, accounting for 28.3%.

( 3.4 KOL Behavior and Earnings

• 86.5% of users have protocol income, 4,718 users have income exceeding 0.1 ETH.
• Top KOL daily income is approximately 6,000-8,000 USD.
• 99.94% of account Keys holdings are below 100, priced below 0.6 ETH.
• Self-increasing holdings is not the best strategy and is difficult to achieve high profits.

![Friend.tech Token model Depth analysis and prospects discussion])https://img-cdn.gateio.im/webp-social/moments-ffde9b4da3523a2ade70acfa4b377102.webp###

( 3.5 platform persistence issue

• The increase in Keys price has led to a stagnation in trading, with trading peaks concentrated on the day of creation.
• New Keys contribute nearly half of the daily trading volume, the platform faces challenges in acquiring new KOL resources.
• The trading volume of top KOL Keys is showing a downward trend, which is unfavorable for the sustainability of the project.

![Friend.tech Token model Depth analysis and prospects discussion])https://img-cdn.gateio.im/webp-social/moments-30209c136704bbe1990b435517763bfb.webp###

( 3.6 User Social Network Analysis

• 79.2% of users are connected within the same community.
• On average, each user has 3-4 friends, and the contacts among friends are close.
• 13.5% social relationships are reciprocal.

![Friend.tech Token model Depth analysis and future discussion])https://img-cdn.gateio.im/webp-social/moments-0d9c3e20d51f01c897a721a3ad03e824.webp###

4. Summary and Outlook

( 4.1 Application Defects

• The core social features are simple, and user retention appeal is insufficient.
• There are fraud, technical issues, and other factors affecting normal use.
• It is impossible to restrict users from interacting directly with the contract bypassing the front end, undermining the original intention.
• User privacy issues raise concerns.
• The barrier to replicating the business model is low, facing homogenized competition.

![Friend.tech Token model Depth analysis and prospects discussion])https://img-cdn.gateio.im/webp-social/moments-d48a96128de8aebddc516d344b75687f.webp###

( 4.2 Thoughts on Web3 Driven Social Networks

• Web3 development needs to attract non-speculative users.
• The reconstruction of social networks faces high transfer costs.
• Token incentives are a unique advantage of Web3, but their sustainability is questionable.
• How to convert speculative users into real users is a challenge.
• The reasonableness of the Token subsidy strategy needs to be weighed.

![Friend.tech Token model Depth analysis and prospects discussion])https://img-cdn.gateio.im/webp-social/moments-5d7944009432500401f8a676f403d2e0.webp###

The sustainability of the Friend.Tech economic model is relatively low, but it may have development potential in social functions. Web3 social platforms need to address issues such as Token economic model design and user retention to achieve long-term development.