Friend.Tech Token Plummets as Co-Founder Weighs Exit: Is This the End of the SocialFi Project?

With decentralised social networks (DeSo) surge in popularity, it promises to redefine our online interactions.

Among these platforms is Friend.tech, a new decentralised social media venture that "tokenises" personalities on X.

Launched on 10 August 2023, Friend.tech quickly generated significant hype, attracting both enthusiastic supporters and vocal critics.

Celebrities like ZhuSu and crypto key opinion leader (KOL) Adam Cochran promptly joined the platform, engaging in trading and contributing to its rapid rise in prominence.

Built on Ethereum’s layer-2 scaling network Base, Friend.tech enables users to buy and sell "keys" tied to X's accounts.

This platform allows users to trade shares of their favorite personalities, speculating on their value.

Owning these shares also provides exclusive access to private chats with the personalities whose shares they hold, offering a unique and engaging way to connect with influential figures.

On 19 August, Paradigm revealed its participation in the seed round investment of Friend.tech, propelling the platform into the spotlight.

Friend.tech subsequently set an astonishing record of 580,000 transactions per day.

Promising Start Plagued by Constant issues

Despite Friend.tech's promising start, it quickly faced the common fate of many SocialFi platforms, becoming a "flash in the pan."

Within just two weeks, daily transactions plummeted by approximately 95%, from 580,000 to just 25,000.

Correspondingly, daily revenue dropped from $1.7 million to a mere $170,000.

Issues such as founders withdrawing coins, robot accounts exploiting the system, and frequent changes to point rules led to a decline in user satisfaction.

Additionally, numerous legitimate user accounts were mistakenly flagged as bots, further accelerating Friend.tech's downfall.

Co-Founder's Potential Exit, Hints at Strained Relationship

Friend.tech co-founder, known pseudonymously as Racer (@0xRacerAlt), has hinted at a potential departure from Base, the Ethereum Layer-2 network launched by Coinbase in 2023 that currently supports the platform.

This announcement led to a sharp decline in Friend.tech's token, which is now trading at $0.9949, reflecting a drop of over 30% in the past day.

Racer announced on X a $200,000 system design bounty for anyone who can devise a method to migrate Friend.tech off of Base without causing significant user disruptions.

This reward will be granted if the proposed solution proves viable for adoption.

Racer cited a strained relationship between the Friend.tech team and Base as the impetus for this initiative.

Additionally, they mentioned that the project faced backlash from Farcaster investors during its launch, leading to a deteriorated relationship and a sense of exclusion from the Base community.

This misinterpretation of their project by Farcaster investors has contributed to the Friend.tech team feeling ostracised and disconnected from both the Base and Ethereum ecosystems.

Racer's X account shows that it does not exist.

Source: Racer's X Account

In light of these developments, Jesse Pollak, leading Base for Coinbase, responded with a diplomatic statement.

He acknowledged the feelings of isolation and disconnection expressed by the Friend.tech team from certain segments of the Base and Ethereum ecosystems.

Additionally, Pollak conveyed a sense of regret at the prospect of Base potentially departing, emphasizing his commitment to respecting and supporting whatever course of action Friend.tech ultimately chooses.

Token Tanks After Airdrop Fails to Deliver

Just earlier this month, Friend.tech sought to mark the release of its version 2 protocol by initiating an airdrop of its native token, FRIEND.

However, what began as a moment of anticipation swiftly turned into turmoil as the token's value embarked on a tumultuous journey.

Surging to a peak of $167 in the immediate aftermath of the launch, FRIEND then spiraled downward, plummeting to less than $2 within a brief span.

According to DEX Screener data, the token experienced a staggering 98% decline in value coupled with minimal liquidity.

Analysts attribute this crash to two primary factors: liquidity constraints and a frenzy of selling activity.

It seems that Friend.tech encountered a liquidity bottleneck in its initial liquidity pool, the funds available for token transactions.

This inadequacy resulted in even minor sell orders having a disproportionate impact on the token's price, leading to rapid declines.

Analysis from Messari indicates that the Friend.tech team initially allocated a liquidity level far exceeding the fees collected.

Adding to the complexity, a substantial portion of users who received airdropped tokens promptly opted to sell them, potentially exploiting the initial price surge.

This widespread selling pressure exacerbated the price downturn, fuelling a cycle of declining value.

Compounding the issue, many users encountered difficulties in claiming their airdropped FRIEND tokens, prompting successful claimants to sell significant portions of the token, consequently driving down prices.

Meanwhile, others were unable to collect the airdrop due to technical glitches and an interface that proved less than intuitive.

These challenges led to user frustration and raised concerns about the efficacy of the launch strategy.

Although liquidity levels improved and the number of token holders rose, sellers outnumbered buyers by more than 2,000.

Coinbase Director Conor Grogan reflected on the Friend.tech token launch as a noteworthy case study on airdrop culture and the ensuing market dynamics post-distribution.

He remarked:

“The FriendTech airdrop is interesting because we get onchain proof of everyone's trading acumen in an identity-linked way in about as good a natural experiment as you will ever get.”

Going Toward a Downward Trajectory from the Start

In its inaugural month, referral codes shared on X were swiftly claimed, attracting a diverse array of personalities, from professional athletes to content creators on platforms like OnlyFans.

Notably, adult performers and crypto advocates emerge as the most sought-after categories among Friend.tech profiles today.

Source: Dune Analytics

However, registering for a Friend.tech account does not equate to active participation.

Many sign-ups stalled at the stage requiring them to send ETH to purchase shares.

Even among those who completed this step, retention rates remained low.

The influx of value into Friend.tech's protocol dwindled dramatically from $16.8 million on 21 August to $1.3 million on 28 August, marking a staggering 92% decline in just one week.

Transaction volumes mirrored this decline, plummeting from over 1.5 million on 21 August to 36,000 on 29 August.

While some observers viewed Friend.tech's rapid rise and fall with little surprise, others attributed it to the tendency of investors to chase after tokens endorsed by influential figures.

Shortly after launch, Friend.tech introduced a 'bonus' feature for shareholders, now known as 'key' holders, enabling private chats with the platform's influencers.

However, even this incentive failed to sustain user interest over time.

Source: Dune Analytics

Less than a month into its existence, the Friend.tech phenomenon appeared to have fizzled out faster than expected, even by fad standards.

Developers like Racer and the launch team at Coinbase’s Base may have emerged as the true beneficiaries, having amassed over $4 million in fees within this short timeframe.

Base facilitated 2.4 million transactions for Friend.tech, totalling a transaction volume of $44.5 million.

Notable personalities also seemed to have profited handsomely.

For instance, Up Only podcaster Cobie raked in approximately $166,400, while e-sports figures like the FaZe Clan also cashed in.

FaZe Banks earned roughly $84,500 on Friend.tech, while even Racer pocketed $136,000.

However, as is often the case with crypto ventures, the vast majority of buyers are unlikely to replicate such profits, with many facing losses instead.

Several categories of Friend.tech celebrities have seen significant declines in their shares' values, particularly OnlyFans creators.

Even shares associated with moderately renowned Twitter Spaces host Mario Nawfal plummeted by nearly 32% from their peak values.

Analysis of FRIEND transaction volume reveals a notable downward trajectory, currently hovering around 300,000, marking a substantial decline from its peak of $6.8 million on the inaugural day.

Source: Dune Analytics

Concurrently, there is a decrease in the formation of new clubs.

While this could signify club maturation and user integration, it is essential to note that declining club creation contrasts with the major update feature of V2, potentially indicating subdued demand for this new model.

Furthermore, FRIEND liquidity has reached a standstill.

Liquidity is paramount for token growth and price trends, yet despite incentives for providing liquidity on Friend.tech's native DEX, the token's liquidity has seemingly plateaued, suggesting a potential cap on price action.

Following the FRIEND release, Friend.tech has not garnered the same level of attention as previously observed.

Speculation within the community suggests that V2 might be part of a strategic plan by the team, aiming to gather feedback, iterate, and subsequently unveil a revamped version of the application.

Is Friend.Tech Doomed from the Start?

Amidst its lofty aspirations, the platform finds itself descending into decline.

This prompts the inquiry: Was Friend.tech destined for failure since its inception?

The collapse of BitClout served as a cautionary tale, highlighting the inherent risks embedded within Friend.tech's structure.

Much like Friend.tech, BitClout attempted to capitalise on social connections through the creation of "creator coins" within a blockchain-based social network.

However, its convoluted revenue model, reliant on a proprietary cryptocurrency accessible only through Bitcoin, fostered an economically unsustainable environment.

By adopting a model reminiscent of BitClout's failed experiment, Friend.tech seemingly sealed its own fate.

The parallels between these platforms—whether in their approaches to monetisation, community involvement, or problematic leadership—suggest that Friend.tech's destiny may have been predetermined, mirroring the tumultuous downfall of BitClout.

So despite its grand promise of revolutionising digital interactions, the platform has been marred by a series of challenges right from the start—ranging from a blemished revenue structure to an unreliable team, all underscored by a history of past failures.

Is this perhaps the beginning of the end of Friend.tech?