Behind the "escape plan" brewed by Friend.tech's founder: both coin prices and active users are declining

Author: Mia, ChainCatcher

Editor: Marco, ChainCatcher

In the ever-changing landscape of Web3 social networks, an announcement from the Friend.tech protocol has caused a significant stir in the market. Recently, its co-founder (pseudonym Racer) posted on social media, hinting at an intention to migrate the Friend.tech protocol away from the current Base platform, which immediately led to a sharp decline in the price of the protocol's native token, FRIEND. According to CoinGecko data, on the day of the announcement, the price of FRIEND dropped to $1.01, with a 24-hour decline of as much as 32.2%.

On-chain data shows that "Brother Magi" Huang Licheng's address has accumulated 4,873 ETH (approximately $15.35 million) to buy FRIEND at an average price of $1.9, currently facing an unrealized loss of $7.54 million. Projects facing the risk of being "cut" like "Magi" are still in the minority, and there are rumors in the crypto community about Friend.tech being "cooling off." So what exactly went wrong with Friend.tech, which once dominated SocialFi?

The Migration Controversy

On the afternoon of May 26, Eastern Time, Racer publicly expressed a desire to leave the Base network created by Coinbase in his post and explicitly proposed a "system design bounty" plan, promising to pay up to $200,000 to anyone who could find a way to smoothly migrate the Friend.tech protocol from Base without causing significant issues for users and ensuring the stable operation of the system.

In another post, Racer elaborated on the roots of the tense relationship between the Friend.tech team and the Base platform. He pointed out that misunderstandings and smear campaigns from Farcaster investors, along with pressure exerted on the team and users, led to Friend.tech being ostracized within the Base community. This strained relationship prompted the Friend.tech team to consider seeking a new platform to support the ongoing development of their protocol.

Currently, the relevant posts are no longer accessible, and Racer's X account has been locked since the post.

In response, Jesse Pollak, head of Coinbase's Base, expressed understanding, acknowledging in a post that the Friend.tech team had experienced feelings of isolation and loss, and stated that he would support whatever path they choose. Pollak wrote, "If the team decides to leave Base, I will be sad, but I respect and support any path they choose—this is the beauty of decentralization and on-chain economics."

The Rise and Fall of Friend.tech

Since its launch on August 10, 2023, Friend.tech quickly became one of the most notable dApps on the base layer, with over 200,000 users and a trading volume of $230 million.

Friend.tech closely integrates with X, acquiring users' Web2 identities, allowing users to potentially earn based on this identity by converting user influence into tradable "key" tokens, enabling users to directly gain the attention or influence of creators. This model attracted a wide user base, including NBA player Grayson Allen, well-known cryptocurrency mogul Cobie, and prominent trader RookieXBT, all of whom are members of the Friend.tech community.

As one of the most successful Web3 decentralized applications in SocialFi, Friend.tech generated over $2 million in revenue in its first month, with net deposits reaching $33 million.

However, as the novelty wore off, in the past few months, the daily revenue of the Friend.tech protocol has fallen below $20,000. On-chain data shows that Friend.tech's daily activity has significantly declined since peaking on September 13 last year (with a record daily trading volume of 539,810 transactions).

Despite facing challenges from declining data, expectations for airdrops and anticipation for the V2 version have kept Friend.tech's popularity rising. The native token FRIEND launched on May 3 of this year, reaching a price of $3.26 on the same day (a historical high). According to Dune data, the protocol's daily revenue on May 3 also exceeded $500,000.

However, as the positive news materialized, on-chain activity began to calm down, and the token price continued to decline. Within less than 30 days of FRIEND's launch, it had dropped 65% from its previous peak.

Without a white paper to support its vision, the token FRIEND transformed from "big hair" to "big cut," and the so-called "bottom fishing" became bottomless. As the token price continued to "plummet," Friend.tech was also dragged into the abyss.

The Finger Pointed at the Base Chain

After the short-term positive news materialized, Friend.tech fell into silence again. To revive the project and bring it back into users' view, a breakthrough was needed, and co-founder Racer pointed the finger at the Base chain itself.

Racer stated that Friend.tech was labeled as "negative speculation" within the Base community, leading to the team being ostracized and isolated on Base, attributing much of Friend.tech's developmental difficulties to Base.

In fact, at the inception of Base, Friend.tech was one of the pioneering projects that ignited the Base ecosystem after Bald, and its success was closely tied to the initial hype surrounding the Base network, which provided strong technical support for Friend.tech.

The Base mainnet launched on August 9, 2023, and by August 11 (the day Friend.tech launched), its TVL had reached $180 million. Following the release of Friend.tech, Base's TVL rose to $243 million by August 23.

Initially, Friend.tech and Base seemed to have a mutually beneficial partnership. Jesse Pollak, head of Base, publicly stated that Friend.tech made significant contributions to Base's on-chain data, and that on-chain social applications like Friend.tech would be "an important part" of Base's ultimate goals.

However, this seemingly good cooperative relationship began to show cracks after the new decentralized social network Farcaster landed on Base.

This year, with the explosion of the Base ecosystem, Farcaster experienced a strong growth surge, and the influx of new users led to an increase in protocol revenue.

In contrast, as the heat generated by Friend.tech's asset issuance mechanism declined last year and activity within the economy continued to drop, a large number of users flowed to Farcaster, which is also on the Base chain. Therefore, the co-founder of Friend.tech attributed the decision to part ways with Base to the "misunderstandings and smear campaigns" from Farcaster users.

Friend.tech as Racer's New "Trial and Error"

Racer, the co-founder of Friend.tech, is a serial entrepreneur in Web3 who began exploring the decentralized social space as early as 2022.

TweetDAO

Racer first gained fame through the decentralized social media project TweetDAO, which was associated with Twitter and granted usage rights to its Twitter account through holding its native NFT "TweetDAO Egg."

The "TweetDAO Egg" increased its minting price through an algorithm: the first batch of Eggs was minted at a price of 0.1 ETH, but for every 100 NFTs sold, the price would increase by 0.1 ETH, up to a maximum of 1 ETH. This way, not only did early minters have an advantage over secondary buyers, but early minters also had an advantage over later minters, leading to more speculation.

TweetDAO never promised any financial returns or future utility, yet users still spent thousands of dollars to gain the opportunity to tweet and then speculate; ultimately, many managed to resell their EGGS for profit—however, once accounts were suspended, people were left holding worthless NFTs.

As tweets were unregulated, NFT holders could tweet without worrying about repercussions, leading to a variety of tweet speculation. Although the project initially achieved viral success similar to Friend.tech, it gradually faded from public view, and currently, its Twitter account and website have been shut down.

Stealcam

As the hype around TweetDAO began to wane, Racer collaborated with a developer known as Shrimp/Shrimppepe to create the Web3 decentralized social platform Stealcam, which launched on Arbitrum in March 2023. The project aimed to unveil the "mystery" of its NFTs by converting users' selfies and static images into pixelated NFT images through a paid model.

"Steal" is like purchasing, but users do not need the seller's consent. The first person to "Steal" an NFT can obtain it completely free, but all subsequent stealers must pay to display the image. If your NFT is "Stolen," you might suddenly find more ETH in your wallet, but the image will be gone.

Unlike "TweetDAO Egg," Stealcam increased secondary sale prices through an algorithm, requiring users who "Steal" images from the original thief to pay 0.001 ETH, with each subsequent "Steal" of the same image costing 0.001 ETH plus 10%, with no price ceiling.

Similar to the profit-sharing model in Friend.tech, previous NFT holders in Stealcam would receive the fees paid for "Stealing" the image, as well as 45% of the price difference between the new stealing price and the previous stealing price, while another 45% of the price difference would go to the image creator, and the remaining 10% would go to the protocol.

However, when Stealcam faced a severe decline in creator income, the development team decided to make changes, and the mechanism and model of Stealcam became the precursor to Friend.tech.

Friend.tech

Faced with the failure of Stealcam, Racer did not intend to start over but instead rebranded the previous Stealcam to Friend.tech in May of last year and launched it on Base.

To enhance its social attributes, Friend.tech released V2 on March 3, 2024, aiming to strengthen user management and interaction through CLUB, where all transactions within CLUB use the FRIEND token, with a 1.5% fee charged for each transaction.

From TweetDAO to Friend.tech, Racer is passionate about the SocialFi track and prefers to maximize the asset issuance attributes within it. However, each project seems to struggle to escape the "Ponzi" death cycle of high opening and low closing. Currently, Friend.tech is also on a downward trend.

It is worth noting that since its inception, Friend.tech still lacks a detailed roadmap or white paper, which seems too casual for a project aiming for long-term development, making it difficult for users not to categorize Friend.tech as another "trial and error" by Racer.

Controversies Surrounding Friend.tech's Mechanism

Racer has always emphasized the "Fi" in SocialFi, rather than true social aspects. Therefore, in terms of network construction, Friend.tech merely purifies and strengthens the social network of Twitter, still forming a closed network centered around individual nodes.

Moreover, the high registration threshold of Friend.tech limits the development of its user base. Currently, Friend.tech employs an invitation system, requiring users to obtain a referral code and deposit at least 0.01 ETH to complete registration. This strategy undoubtedly restricts participation from ordinary users, giving a strong sense of forced buying and selling.

At the same time, the "key" used by the platform, due to its extreme volatility and speculative nature, further increases the risks for user participation. As pointed out by crypto KOL Yazan, "paying 1 ETH to access a group chat is 'absurd'"; if the creator gets bored and leaves the application, the price could quickly drop to zero.

The platform's sustainability is also in question. Initially, Friend.tech achieved rapid growth through an influencer-centric strategy, but as the initial excitement faded, users began to question its long-term viability: the platform's over-reliance on influencers could lead to a rapid decline in value once these key figures are no longer actively engaged.

In response, Friend.tech made a strategic adjustment in the V2 update, shifting from an influencer-based model to one that emphasizes a broader community. However, questions remain about the level of influencer participation and the actual value they bring when inactive on the platform.

Currently, rumors are circulating in some crypto communities that "Friend.tech can't compete with Farcaster" and "Racer is about to run away again."

But regarding various controversies, Racer seems unfazed. As a WEB3 serial entrepreneur, he appears to have a deep understanding of the survival principles within this space; any new concept output can become a new hotspot, and where there is a hotspot, there is hot money. This is why Friend.tech secured seed round financing from Paradigm with its "new gameplay."

Additionally, based on the principle of "charging a 5% protocol fee on each transaction, plus another 5% fee from stock issuers," Friend.tech has so far collected approximately $13.35 million in transaction fees, while the Friend.tech team has earned about $6.625 million.

According to Friend.tech's related pages, Racer remains active on Friend.tech, currently only accessible through purchasing his personal key to view his personal remarks, priced at 0.94 ETH. Racer's deletion of his X account and posts may also be aimed at further speculating on his personal key.

This time, Racer's post about the split with Base, hinting at a migration away from Base, aligns perfectly with his "fire a shot and change the cannon" style. However, Racer did not disclose any further migration plans and deleted the post and his X account. So, is this post merely a new hype for generating heat, or is it a search for a new path for Friend.tech?

But in terms of the market value of the native token Friend, users seem unconvinced this time, as the token price remains around $1.17.