FriendTech: A New Exploration of Social Tokens and Potential Risks

While the overall market in the crypto world is quiet, the new social Token product FriendTech has attracted considerable attention. From initially facing skepticism to gradually gaining recognition, FriendTech's development has gone through several stages of ups and downs.

FriendTech officially launched on August 10, 2023, quickly attracting the attention of the Chinese community. The innovative model of the product, the potential airdrop expectations, and the enthusiasm for new gameplay drove early rapid growth. However, this surge in popularity did not last long. After experiencing a brief peak, activity saw a noticeable decline, and there was also a significant amount of negative discussion in the market.

Until August 19, the official announcement of a seed round investment from a well-known investment institution boosted market confidence once again. The number of active users and trading volume both saw significant growth, with the total locked value (TVL) rising from over $1 million to $7 million. However, this wave of enthusiasm also did not last long.

After experiencing a period of low activity for about half a month, FriendTech's trading volume has recently seen a significant increase, doubling compared to before. The TVL has also surged sharply, currently reaching 31 million USD. The number of independent accounts has reached 140,000, although the number of daily active addresses has not yet reached the previous highs. Overall, FriendTech is entering a new wave of enthusiasm.

Why can FriendTech maintain its popularity?

Compared to some social projects that were once popular but quickly faded, FriendTech seems to attract users to participate continuously and invest funds. The reasons for this mainly include the following points:

1. High-quality user group

According to observations, the recent surge in popularity of FriendTech is largely due to the entry of various institutions, project founders, and well-known bloggers from the English-speaking community. Their participation not only brought in capital but also directed the attention of the entire market. Subsequently, some influential bloggers from China also joined in, attracting more onlookers to try it out.

At the same time, FriendTech effectively suppresses the emergence of low-quality accounts through incentive mechanism design. This avoids the phenomenon of multiple accounts per person that appeared in some previous social projects, thereby reducing the behavior of exploiting and arbitrage, and ensuring user quality.

In addition, the strong binding of FriendTech with the Twitter platform, along with the mechanism of sharing half of the transaction fees with homeowners, not only leverages existing social platforms for a cold start but also provides significant revenue incentives for content creators. According to statistics, as of September 14, FriendTech has generated $8.37 million in revenue for homeowners.

2. Airdrop Expectations

In addition to direct incentives for homeowners, FriendTech also plans to distribute points to users weekly over the next six months, totaling 100 million points. The community generally believes that these points are likely related to future Token airdrops. Optimistic estimates suggest that the total circulating market value of FriendTech at launch could reach $2 billion, and with a 10% airdrop ratio, each point could be worth $2.

The distribution rules of points mainly consider factors such as the activity level of the room, the total amount of KEY assets held, and the holding duration. This mechanism encourages users to hold KEY for the long term, thus enhancing the expectation of price increases. Currently, there is even a phenomenon in the community similar to "(,3)", where users mutually purchase and hold each other's KEY for a longer period to earn more points.

3. Strong resource support

FriendTech's only current investor is a well-known investment institution in the industry. Several projects that this institution has previously invested in and guided, such as a well-known DEX, a derivatives trading platform, and an NFT trading platform, have all grown into phenomenal products in the industry. This provides a confidence guarantee for the development prospects of FriendTech.

In addition, FriendTech has chosen to build on the Base chain, which also means that the development team behind the Base chain is likely to provide strong support. The influence of a certain large exchange behind the Base chain in the entire cryptocurrency industry is self-evident.

4. Meet upward social needs

Unlike previous blockchain social products that focused on concepts such as content rights confirmation and cross-platform protocols, FriendTech aims at a relatively underserved market demand: upward social networking. It provides ordinary users with the opportunity to connect with high-level talents, such as project founders and investment institutions. At the same time, professionals from fields such as healthcare and education have also begun to offer services on the platform, bringing more value to users.

Potential Risks of Participating in FriendTech

Despite the many advantages that FriendTech presents, participants should still be aware of the following risks:

1. The robot's profit is too high.

Due to the market expectation that bloggers with high traffic have higher value, this gives robots an opportunity. They use data analysis to purchase in advance and quickly sell off after making a profit. Even though some users try to guard against this by setting their Twitter privacy mode, there are still robots that engage in arbitrage by analyzing on-chain transaction data.

Data shows that currently more than 140 robots have made a profit of a total of 2.2 million dollars through FriendTech, accounting for a quarter of the total profit. This not only raises the entry barrier for ordinary users, but may also exacerbate the decline in the market during future corrections.

2. The price curve is steep, making it easy to trigger a sell-off.

The KEY pricing formula used by FriendTech is: price (ETH) = (Keys total supply^2) / 16000. This results in early users entering at almost zero cost, but once the purchase quantity exceeds 20, the price gap between users widens sharply.

This pricing mechanism can easily lead to a price surge in the short term, attracting more users. However, once the momentum of growth is exhausted and early users start to take profits, it may trigger a panic sell-off, forming a death spiral. Later users not only have to bear a 20% trading friction cost but also face the risk of a significant drop in the KEY price.

3. There are contradictions in the product logic and profit model.

The points incentive mechanism of FriendTech encourages users to hold KEY for the long term. From the perspective of user demand, enjoying long-term services in a room should also require long-term holding. However, the profit model of the platform and the room owners relies on the transaction fees generated from frequent trading.

This contradiction may lead to homeowners providing high-quality long-term services earning less, while homeowners with speculative value obtain most of the profits. Over time, this may create a negative cycle, which is detrimental to the healthy development of the ecosystem.

Conclusion

FriendTech has undoubtedly seized a gap in the market and attracted high-quality users through clever rule design. Strong background support has also earned it market confidence. However, the product itself still has some logical contradictions and potential risks.

If you want to participate in FriendTech, it is recommended to try it under strict position control. At the same time, we also look forward to the official team introducing corresponding improvement measures to address existing issues, ensuring the long-term value of the platform. For the entire industry, the development of FriendTech undoubtedly provides new ideas and possibilities for the social Token field.