Friend.tech is a decentralized social media platform that has rapidly gained attention within the crypto community. The platform is built on top of Coinbase's Base extension network, allowing users to buy and sell "keys" (initially referred to as "stocks") of their favorite Twitter accounts. The Friend Key on Friend.Tech represents ownership of a specific Twitter account, enabling users to own the account and engage in private communication with the account holder.
Market Overview of Friend.tech
As of September 15th, according to the latest data from DefiLlama, Friend.tech has generated 2.27 million USD in protocol revenue over the last 24 hours, ranking second only to Ethereum's Lido. This achievement solidifies its prominent position in the social DeFi space within just about a month since its launch. From August 10th to September 26th, Friend.Tech has accumulated a total of 419,645 users, created 203,953 keys, holds 258,859 keys, with a total protocol fee of 9,022.551 ETH and a cumulative transaction volume of 7,775,861.
A few weeks ago, when user activity on the Friend.tech platform experienced a significant decline, many in the cryptocurrency community quickly declared the demise of Friend.tech. The DeSo (decentralized social) protocol initially showed significant growth since its launch but later faced a decline. However, the tide has turned, and Friend.tech has experienced a substantial resurgence in the past few days, regaining support and enthusiasm from cryptocurrency influencers and the entire community. In fact, some users claim that popular YouTubers and OnlyFans creators have joined the platform, further driving its growth.
Participation in Friend.tech
As a new Web3 application, joining the platform and starting to trade Friend Keys comes with some barriers. Here is a simplified guide on how to use Friend.Tech securely:
1. Users bind their Twitter (X) accounts within the app, with each account corresponding to a set of keys (initially referred to as stocks), and there is no limit to the number of keys per account.
2. Each set of keys starts with an initial quantity of 0, and users can receive their first key for free on the platform to activate additional features.
3. Users can purchase keys from other users to become holders, granting them the ability to engage in one-on-one private chats with the user whose keys they hold.
4. Users can buy more than one set of keys from different users, including themselves, and also sell the keys they already hold back to the platform.
Economic Model of Friend.tech
The economic model of Friend.tech appears straightforward:
1. Key prices increase as the quantity of keys grows.
2. A 10% transaction fee is charged on each transaction, split between the protocol and key issuers.
3. Credits will be distributed to users over the next 6 months.
The core of the model is designed to allow early adopters to profit. If we imagine that all users enter one by one, considering that S can only be an integer, differential calculus and summation should be used. It can be seen that ΔP/ΔS is linearly increasing, ensuring that as the number of keys grows, the price of keys increases, and the rate of price increase accelerates (i.e., it rises faster).
Transaction Friction on Friend.tech
In actual transactions, users need to pay an additional 10% fee when purchasing keys (with 5% allocated to key creators and 5% to the Friend.Tech project for development, support, and community building). When selling keys, users will only receive 90%, with the remaining 5% going to key creators and 5% to the Friend.Tech project. This means that if a user sells a key at the purchase price, they will incur a 20% fee loss.
Due to these fees, even as the number of keys held continues to increase, selling does not necessarily equate to continued profits. In fact, to break even, incremental users need to increase their key holdings by 10.6% from their initial purchase. Before breaking even, the total cost for incremental users increases exponentially. If a user purchases the 200th share of a certain key, they will need to wait for subsequent users to buy 22 keys (total payment of 68 ETH) before breaking even.
Excluding transaction gas fees, 90.2% of users' profits fall within the range of +/- 0.1 ETH. 52.6% of users achieve positive returns, but only 2.17% of users earn more than 0.1 ETH in profit. The top 100 users in terms of earnings collectively account for 47.9% of the total earnings of 9004.58 ETH, representing less than 0.1% of the user base.
Friend.Tech, by innovatively utilizing Friend Keys, has decentralized the interaction and ownership of Twitter accounts, ushering in a new approach to social media. The platform enjoys robust financial support and aligns the project's economics closely with user interests through key sales, forming a community of shared interests. Users can profit from key transactions by engaging in external promotion, while satisfying their desire for status display. This stimulates users' intrinsic motivation to actively promote the product and bring external traffic. However, the inherent flaws commonly found in current Web3 social platforms, such as rudimentary token economic models and inflexible smart contracts, undoubtedly pose challenges to the platform's sustainability.
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