How did Farcaster attract investment from famous VCs after raising US$150 million?

Author: Mia, ChainCatcher

Recently, Farcaster, a star product in the decentralized social track, completed a $150 million Series A financing led by the veteran Web3 investment institution Paradigm with a valuation of $1 billion. In addition, many well-known crypto capitals including a16z crypto, Haun, USV, Variant, and Standard Crypto also participated in the investment.

According to the relevant page of Rootdata, this investment in Farcaster is also another bet by Paradigm in the SocialFI track after the seed round of financing of friend.tech. This is also the first time that a16z has invested in a decentralized social network.

According to Dune Analytics data, as of May 20, Farcaster had nearly 45,000 daily active users in the past 7 days, an increase of 30% since the peak of the Frames craze on February 11.

What makes Farcaster different?

Farcaster was jointly launched by Dan and Varun, early employees of Coinbase. It is a protocol based on the Ethereum second-layer Optimism mainnet, which aims to build decentralized social applications. Although Farcaster may be relatively unfamiliar to some people, it has become one of the hottest topics in the US crypto community in the past few months. Not only has it received likes and entries from Ethereum founder Vitalik Buterin and Base Chain creator Jesse Pollak, it has also established several community channels with tens of thousands of people, including degen and farcaster.

According to Dune Analytics data, the total number of Farcaster users has approached 400,000, and it is gradually becoming another important crypto social gathering place after X.

As a member of the SocialFi track, Farcaster can't help but remind people of friend.tech, which became popular due to the issuance of "Key" assets. However, unlike friend.tech, Farcaster has returned its focus from Fi to Social, rather than simply pursuing innovation at the Fi level.

Since its inception, Farcaster has been committed to building a decentralized social media protocol, aiming to provide an open and composable social layer for developers, creators and ordinary users. Farcaster positions itself as the infrastructure in the social field, closer to the concept of "Layer" rather than a single Dapp application. It is based on this "Layer" concept that Farcaster has the potential to derive more diverse and broader application scenarios.

Social Main Battlefield Warpcast

Currently, the social main battlefield of the Farcaster protocol is the first client application launched by its team - Warpcast, which is also the most influential application under the protocol. Each Warpcast account corresponds to a unique Farcaster ID, and all content generated through Warpcast is securely stored on Farcaster's central server.

On Warpcast, users can freely post and share their views and insights. At the same time, they can also join channels of their interest to have in-depth discussions and exchanges with like-minded users.

In addition, Warpcast also supports the integration of mini-programs (Frames), providing users with more interactive possibilities, such as minting NFTs, claiming tokens, and conducting transactions.

The launch of Warpcast adds a distinct community label to the Farcaster social layer. Compared with traditional SocialFi products, Farcaster stands out with its unique community cultural attributes, giving each user the power to create exclusive channels, create a unique community culture, and issue assets.

This strong community attribute has promoted the prosperity of the Degen channel on Warpcast, which has attracted nearly 80,000 users and spawned the leading memecoin DEGEN and DegenChain. Initially, DEGEN was distributed as a reward to channel users, and now it has become the most popular reward token on Warpcast. In order to further incentivize content creators and enhance interaction between users, Warpcast users can receive a reward of 8 $DEGEN coins every day.

With the surge in the number of $DEGEN holders, the team launched the Ethereum third-layer network (L3) Degen Chain based on market demand, which also gave $DEGEN a practical application scenario. This combined strategy successfully diverted memecoin players to the Farcaster ecosystem and expanded the audience of the protocol from a few native WEB3 technology players to a wider range of ordinary investors.

The influx of a large number of crypto users further amplified the social attributes of Farcaster and rapidly expanded its influence under the guidance of Fi. Therefore, Farcaster was labeled as a "fully decentralized social network."

“High-quality” and “low-noise” community culture

Variant Capital mentioned in the article “Investing in Farcaster” that Farcaster’s notable feature compared to traditional social media is its high-quality and low-noise community atmosphere.

In a high-quality community, members usually post in-depth and insightful opinions, discussions and ideas; while in a low-noise community, members can more easily find topics and information that interest them, rather than being overwhelmed by a large amount of irrelevant, repetitive, or disruptive information.

In Farcaster, "fully decentralized" permissionless identities, currencies, and data become the foundation for ensuring "high quality" and "low noise" in the community: all encrypted exchanges have an initial threshold here.

First, you have to have your own decentralized identity. Each user identity is associated with an encrypted wallet to ensure that all interactions are verified and authenticated;

Secondly, if you want to try some interesting Frames, it will facilitate the transaction function (receiving and sending payments) of the Farcaster account-linked wallet, thereby unlocking functions such as rewards, minting, crowdfunding, and asset creation, which encourages interaction between users and promotes community activity and creativity;

At the same time, all social data of Farcaster is stored in a decentralized network. This data storage method increases users' confidence in data persistence and security. Users no longer worry about their data being deleted or tampered with by the platform at will, which further enhances the attractiveness of the community and allows more high-quality developers to join the ecosystem and jointly promote the ecological development of Farcaster.

Social collision creates more crypto future

The "high quality" and "low noise" community atmosphere makes Farcaster a gathering place for crypto culture. The decentralized infrastructure provided by the protocol - permissionless identity, currency and data, provides a unique environment for early ecosystem developers. Rather than saying that top VCs are betting on the Farcaster protocol, it is better to say that they are betting on the active developers and builders on the protocol every day.

As Jesse of Variant Capital stated, "The Farcaster community can see the epitome of the early crypto community that joined ten years ago: optimistic, technical, ambitious, collaborative and always online."

In a sense, Farcaster has truly returned to the essence of SocialFi, "socialization", providing a place for brainstorming for explorers in the crypto world, where interpersonal relationships are built and ideas collide.

Socialization creates value, thus giving birth to "Fi". Farcaster's Fi has expanded from a single asset issuance to the entire chain's ecological development, as well as new crypto products such as "degen chain" derived from the collision of community culture.

Variant Capital said that their investment in Farcaster is based on the recognition of the high quality of its community, the forward-looking technology, the richness of its ecosystem, the solid user base, the excellent core team and the long-term value.

Currently, with the disclosure of Farcaster's large financing, Fred Wilson, co-founder of the traditional top VC USV, has published a post to support it and said that he has been active in Farcaster to share his views on technology, startups, venture capital, music, life, etc. on the chain through the protocol. In addition, Fred also called on his X followers to follow his Farcaster account instead. It is worth mentioning that USV was the main investor in the first round of financing of the X platform.

Considering the precedent of Variant Capital's founder Li Jin entering and investing in Farcaster, some analysts believe that under the leadership of Fred Wilson, USV is very likely to become a participant in Farcaster's next round of financing.