In-depth Analysis of Friend.Tech Social Platform: Discussion on Token Economic Model and Future Prospects

Summary

Friend.Tech is a representative SocialFi application that emerged in August 2023, realizing the monetization of social influence through tokenization. This report is based on on-chain data analysis and provides an in-depth analysis of the platform's token economic model:

1. The Token price shows a power-law increase, bringing considerable profits to KOLs, but also limiting the size of the fan community. 99.94% of accounts hold between 0-100 Tokens, with prices generally below 4 ETH.

2. The rigid pricing mechanism has led to a rapid decline in trading volume of high-priced tokens, with an average daily trading frequency of only 7 times on the first day, and thereafter maintaining 1 time or less. The sustainability of the current model's revenue prospects is unclear.

3. The clear arbitrage space attracts a large number of speculators and trading robots, contributing 90.6% of the total trading volume. However, only 18.6% of speculators achieve positive returns, with half of this being captured by 10.8% pure speculators.

After a comprehensive analysis, we comment on the issues and prospects of Friend.Tech as follows:

1. The sustainability of the economic model is relatively low. The high cost of high-priced tokens and low profitability may dampen trading enthusiasm, and the project team needs to continuously attract new users to maintain activity.

2. Social features have development potential. The arbitrage space of tokens can promote spontaneous publicity, users have close connections and are inclined towards reciprocal behavior, setting a good example for the SocialFi model. However, usability and business models need improvement.

1. Introduction to Friend.Tech

Friend.Tech is a new representative of the SocialFi concept in the Web3 field, launched on August 10, 2023. The platform allows users to tokenize their social influence, directly linking it to economic value. Users can purchase others' tokens (Keys) to gain one-on-one private chat qualifications, providing KOLs with a new way to monetize their influence.

The platform operates on the Base chain, and the information held by Keys is stored in smart contracts, with transactions paid using ETH. Users must bind their Twitter accounts to obtain a blockchain address, but they can also interact directly with the smart contracts.

2. Overview of the Token Economic Model

Friend.Tech adopts a fixed price formula based on the total amount of Token holdings:

• Purchase Price: (n+1)^2/16000 ETH
• Selling Price: (n+1)^2/16000 * 0.9 ETH

Where n is the total amount of tokens currently held. A 10% transaction fee is charged each time, 5% goes to the token creator, and 5% goes to the project team.

The advantage of this rigid model is:

1. Avoid early cold start issues
2. Encourage early identification of potential KOLs
3. Provide generous rewards for KOLs
4. Restrict tokens from being infinitely hyped up

But there are also potential issues:

1. Attract a large number of speculators and robots
2. The number of Keys holders is limited.
3. The platform activity decay cycle is short
4. It is difficult to rely on existing users for continuous profits.

3. On-chain Data Analysis

3.1 First Month Performance

Friend.Tech achieved great success on its launch day, with a single-day trading volume exceeding 4,000 ETH on August 11. It peaked on August 21, with a single-day trading volume exceeding 10,000 ETH, 525,000 transactions, and the project team's single-day revenue exceeding 500 ETH.

As of September 19, the platform has a total of 206,706 users, with 203,953 Keys created, 258,859 Keys held, a total of 3,049,066 transactions, and a total transaction amount of 139,530.09 ETH.

3.2 User Classification

Platform users can be divided into three categories:

1. Light participants: ordinary users with low trading frequency and limited profits.
2. Cryptocurrency KOL: Earn protocol share by trading through Keys
3. Profit-seeking speculators: Actively trading popular Keys arbitrage

90.2% of users' returns are within the ±0.1 ETH range, 52.6% of users achieved positive returns, but only 2.17% of returns exceeded 0.1 ETH. The top 100 users account for 47.9% of total returns.

3.3 Speculator Behavior Analysis

• Speculators (21.7% Users ) contribute 78.9% of trading volume and 88.4% of trading amount.
• Only 18.6% of speculators achieved positive returns, averaging 0.65 ETH
• About 186 suspected bot users achieved a positive return of 2553.84 ETH (28.3%)

3.4 KOL Behavior Analysis

• 86.5% of users have protocol income, 4,718 over 0.1 ETH
• The top 3 KOLs have an average daily income of 6,000-8,000 USD
• 99.94% account Keys holding less than 100, price less than 0.6 ETH
• 68.1% of KOLs purchased their own Keys additionally, but the profit is not high.

3.5 platform persistence issue

• The increase in Keys price has led to a stagnation in trading, with the average daily trading frequency dropping from 7 times to below 1 time.
• Nearly half of the daily trading volume is still contributed by new Keys.
• The overall trading volume of top KOL Keys is showing a downward trend.

3.6 User Social Network

• 79.2% of users are connected in the same community
• On average, each user has 3-4 friends
• 41.3% of friends' friends are also friends of oneself
• 13.5% social relationship reciprocity

4. Summary and Outlook

4.1 Application Defect

• Core features are simple, retention rate is low
• There are issues such as fraud and technical failures.
• Unable to restrict users from interacting directly bypassing the front end
• Privacy protection has potential risks.
• The business model is easily replicable.

4.2 The Prospects of Web3 Social Networks

• Token incentives are a unique advantage of Web3 social.
• The current economic model lacks sustainability.
• How to convert speculative users into real users is a key challenge.
• Need to balance Token subsidies with user stickiness

Friend.Tech has achieved initial success, but there is still room for optimization in its economic model and product features. For a Web3 social platform to achieve long-term development, the key lies in attracting and retaining genuine social users, rather than relying solely on Token speculation.