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

Friend.Tech, as a newcomer in the SocialFi field, has quickly risen since its launch in August 2023, becoming one of the most representative Web3 social applications currently. The platform allows opinion leaders (KOL) to tokenize and trade their social influence, attracting significant attention. However, its token economic model and business strategy also face severe challenges.

This report is based on on-chain data analysis and provides an in-depth analysis of the token economic model of Friend.Tech, leading to the following main findings:

1. The price of Keys is rising exponentially, bringing considerable收益 to KOLs, but it also limits the size of fan communities. 99.94% of accounts hold Keys in the range of 0-100, with the price generally below 4 ETH.

2. The rigid pricing mechanism has led to a rapid decline in high-priced Keys trading volume. The average number of daily transactions only reached 7 on the first day, and has since remained at 1 or below. The sustainability of the current economic model's revenue prospects is unclear.

3. The clear arbitrage opportunities attracted a large number of speculators and trading bots, contributing to 90.6% of the total trading volume. However, only 18.6% of speculators achieved positive returns, with half of that earned by 10.8% of pure speculators without linked social accounts.

Regarding the issues and prospects exposed by Friend.Tech, we have the following comments:

1. The sustainability of the economic model is relatively low. The high holding costs of expensive Keys and low profitability may hinder user participation, leading to a decline in trading volume. The project team may need to continuously attract new customers to maintain activity levels, but the long-term viability is questionable. It is recommended to charge a lower percentage fee on expensive Keys to balance profitability and trading volume.

2. Social features have developmental potential. The arbitrage space of tokens can promote users to voluntarily promote. The connections between users are relatively close, making them more inclined towards reciprocal behavior, setting a good example for the SocialFi model. However, the user experience needs improvement, and the business model is easily replicable, which may affect long-term development.

We hope this report can provide valuable references for the future development of the Web3 industry.

1. Introduction to Friend.Tech

A new attempt at SocialFi model

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

After TwitterDAO and Stealcam, developer Racer launched a new SocialFi platform Friend.Tech on August 10, 2023. Users can purchase the qualification for one-on-one private chats with others using cryptocurrency, directly linking social influence with economic value.

The gameplay of value realization of influence

The main gameplay of Friend.Tech is as follows:

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

2. The initial number 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 eligibility for one-on-one private chats.

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

Friend.Tech runs on Base chain ( Ethereum Layer 2), with Keys holding information stored in smart contracts, and transactions are 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 using the APP.

2. Token Economic Model Analysis

rigid pricing mechanism

Keys adopts a fixed price formula based on the total holdings, rather than the traditional order book or AMM model:

• Purchase price: 0.00001 * (supply + 1)^2 ETH
• Selling Price: 0.00001 * supply^2 ETH

A 10% transaction fee is also required, of which 5% goes to the Keys creator and 5% goes to the project party. When selling, you can only receive 90% of the price.

Although the price of Keys increases exponentially with the holding amount, due to transaction fees, the holding amount needs to increase by 10.6% for users to break even. For the 200th Key, it is necessary to wait for subsequent users to purchase 22 coins with a total payment of 68 ETH to break even.

( Analysis of the advantages and disadvantages of the economic model

Advantages:

1. Avoid early cold start and price fluctuation issues
2. Encourage holders to actively promote
3. Allow early investors who identify potential KOLs to profit
4. KOLs can earn rewards by providing social value
5. Limit the possibility of Keys being infinitely inflated.

Potential issues:

1. Fixed pricing encourages buying low and selling high, attracting speculators and bots.
2. The number of Keys holders is limited, and high-priced Keys are difficult to attract rational fans.
3. The activity level of the platform may quickly decline.
4. The platform cannot rely on existing users for continuous profits and needs to constantly seek new KOLs.

![Friend.tech Token model Depth analysis and prospects discussion])https://img-cdn.gateio.im/webp-social/moments-c0ed4f2f821f4abb868677ca9885414a.webp###

3. On-chain Data Empirical Analysis

( 3.1 Project Performance in the First Month

Friend.Tech achieved great success shortly after its launch. On August 11, it recorded the creation of 17,556 Keys, 136,000 transactions, and over 4,000 ETH in transaction volume. On August 21, the daily transaction 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, the number of Keys created is 203,953, the amount of Keys held is 258,859, total transactions are 3,049,066, and the transaction volume is 139,530.09 ETH.

![Friend.tech Token model Depth analysis and prospect discussion])https://img-cdn.gateio.im/webp-social/moments-539f94ab4a2f509d9a5c412cb190929c.webp###

( 3.2 User Type Analysis

Most users have a balanced income and expenditure, with profits showing a long-tail distribution. 90.2% of users have profits within ±0.1 ETH, 52.6% achieve positive profits, but only 2.17% have profits exceeding 0.1 ETH. The top 100 users account for 47.9% of total profits, with user representation of less than 0.1%.

Users can be divided into three categories:

1. Light Participants: Low trading frequency, limited returns
2. Cryptocurrency KOL: Profit from trading commissions through Keys
3. Speculators: Actively trade popular Keys to earn price differences

![Friend.tech Token model depth analysis and prospect discussion])https://img-cdn.gateio.im/webp-social/moments-04c71cc4940aa4eef1b2f40ad191adfc.webp###

( 3.3 Analysis of Speculator Behavior

• Speculators ) contributed 78.9% of the trading volume and 88.4% of the trading amount.
• Only 18.6% of speculators achieved positive returns, of which 10.8% did not bind social accounts.
• Discovered about 186 suspected bots, contributing 28.3% positive returns

![Friend.tech Token model Depth analysis and prospects discussion]###https://img-cdn.gateio.im/webp-social/moments-9396e04aa010e1aa8d61772e3bfca498.webp(

) 3.4 KOL behavior analysis

• 86.5% of users have protocol income, 4,718 KOLs earned over 0.1 ETH
• The top 3 KOLs have an average daily income of about 6,000-8,000 USD.
• 99.94% account Keys holdings <100, price <0.6 ETH
• 68.1% of KOLs purchase their own Keys, but the returns are not high.

3.5 Platform Durability Analysis

• The increase in Keys price has caused a rapid halt in trading.
• After the Keys are created, the average daily transaction count decreased from 7 times to <1 time.
• Nearly half of the trading volume is still contributed by new Keys.
• The trading volume of top KOL Keys is showing a downward trend.

3.6 User Social Network Analysis

• 79.2% of users connect within the same community
• On average, each user has 3-4 friends, and the largest KOL has hundreds of friends.
• The probability that a friend's friend is also a friend of yours is 41.3%
• 13.5% social relationships are reciprocal

4. Summary and Outlook

4.1 Issues with the Application

• Simple functionality, lacking highlights for user retention
• There are fraudulent phenomena such as fake accounts.
• Technical issues affect user experience
• Unable to prevent users from bypassing the front end and interacting directly with the contract.
• There are risks in privacy protection
• Business models are easily replicable, facing homogeneous competition

( 4.2 The Future of Web3 Social Networks

The current economic model of Friend.Tech lacks sustainability and requires continuous acquisition of new users to maintain activity. Converting speculative users into true platform users is a common challenge faced in the Web3 space.

Building Web3 social networks faces many challenges, but Token incentives are its unique advantage. The key to future development lies in:

1. Improve product features and enhance user experience
2. Optimize the Token economic model, balancing short-term attractiveness and long-term sustainability.
3. Explore more diversified user acquisition and retention strategies
4. Strengthen privacy and security protection
5. Create a differentiated competitive advantage

Overall, Friend.Tech provides valuable practice for the SocialFi model, and its success or failure will offer important references for the future development of the Web3 social domain.

![Friend.tech Token model Depth analysis and future discussion])https://img-cdn.gateio.im/webp-social/moments-1ced6b9a4c278e2cf6671b4e4bc94350.webp###