We should be cautious of applications that overly rely on "DeFi".

By Asher Zhang

Recently, the decision by friend.tech to relinquish control of its contract has sparked heated discussions in the market. The team explained that this move does not mean they are running away. So, does friend.tech still have hope? Does the decline of friend.tech refute SocialFi? Why is the decline of friend.tech considered an expected outcome? Where does the real hope for SocialFi lie?

In essence, friend.tech has already gone bankrupt and liquidated, and SocialFi should pay more attention to the "Social" part.

On September 8th, the friend.tech team announced that the Admin and ownership parameters had been set to 0×000…000. As soon as this news came out, the price of the protocol's token FRIEND dropped by more than 20%. According to Coinmarketcap data, the FRIEND token had reached nearly $3 in May of this year, with a drop of up to 97%.

Why did the market react so strongly to friend.tech? This is because friend.tech's move signifies that the development team has given up control of the smart contract, and there will be no further upgrades or improvements to the protocol in the future, leading to speculation in the market that they are running away. However, the team later stated in an article: "The team has no plans to close or stop the friend.tech website application; the previous operation of abandoning contract permissions is mainly to ensure that no future changes can be made to the smart contracts deployed on Base, which may incur additional or new fees; these operations will not in any way affect the current functionality of the friend.tech website application that users know and use."

Although the team's explanation suggests that "everything remains unchanged," from a data perspective, friend.tech is actually struggling to survive. Data from The Block shows that since the end of May this year, the daily active users of friend.tech have been less than 100; on August 7th, the daily active users of friend.tech were only 5, with 3 independent buyers and 2 independent sellers, hitting a historic low. From the perspective of running a company, it is difficult to survive with such operating data, and once the team gives up any new updates, it is even more unlikely to have a chance of revival. Therefore, the author believes that friend.tech has essentially gone bankrupt and liquidated. In addition, the friend.tech team has continuously transferred ETH to Coinbase, with a total of 19,477 coins.

At the time, friend.tech was extremely popular, focusing more on the "Fi" part of SocialFi, stimulating users to migrate quickly through economic incentives. However, the prosperity of friend.tech was more of a "carpetbagger" phenomenon, with a large amount of spam messages being sent to earn tokens, damaging the rights of genuine users, and ultimately ending in a lonely closure after the "carpetbaggers" had finished.

Compared to friend.tech's competitor Farcaster, the decentralized social network protocol Farcaster pays more attention to the "Social" part of SocialFi. For example, with the recent popularity of the Meme token, Farcaster's plugin can deliver these messages to users in a timely manner, leading to an increasing number of Meme projects starting to release information through Farcaster. At the same time, a large number of users have also begun to flock to Farcaster to get the most timely information. At its peak in July of this year, Farcaster had over 100,000 daily active users, and it still maintains 70,000 daily active users.

The success story of Farcaster, with the potential to carry the flag of SocialFi

Although the failure of friend.tech has disappointed the market in SocialFi, there is no need to be too pessimistic about this track. The failure of friend.tech is essentially common in the crypto market, as they have relied too much on the stimulation of the crypto-economic mechanism, and it is difficult to maintain false prosperity once the "carpetbaggers" withdraw. This is not only the case for SocialFi, but also for many projects such as GameFi in the past. For investors, they should be cautious of applications that overly rely on "DeFi". In the future, projects that can truly provide practical functions will go further, and Farcaster has the potential to carry the flag of SocialFi.

As can be seen from the above, Farcaster pays more attention to the "Social" part and can develop targeted application plugins based on the needs of users in the crypto market, which seems to be very successful at the moment. In fact, Farcaster has been very practical from the beginning.

The two founders of Farcaster, Dan and Varun, have held important positions at Coinbase and have rich resources in the crypto market. In the early testing phase, founder Dan used his personal influence and relationships to invite many well-known OGs, including V God, to join, and also screened early users by obtaining invitation codes through private messages on Twitter, resulting in a user base with a high concentration of "elites". In October of last year, Farcaster opened for registration, but still set a $5 entry threshold, effectively preventing a large number of bot accounts from registering, maintaining a good overall atmosphere for Farcaster, in stark contrast to the decline of Nostr due to the proliferation of bots.

Based on the Farcaster protocol, founder Dan also developed a Warpcast application, which currently accounts for 90% of the traffic on the Farcaster protocol. The overall architecture of Warpcast is similar to traditional Web2 social software Twitter, where users can post tweets (casts), comment, retweet, and follow other users. In addition to social media functions similar to Twitter, Warpcast also introduces features such as channels and actions, leading to more diverse ways of interaction. For example, DEGEN uses the participation of users in the Farcaster ecosystem to distribute tokens, and users can participate in DEGEN's airdrops by following channels and interacting, and the airdropped tokens can be given as rewards to other users.

Furthermore, Farcaster's significant growth this year is closely related to the Frames feature launched in February. Frames are mini-applications embedded in Warpcast, allowing users to engage in more diverse interactions without leaving Warpcast, such as minting NFTs, subscribing to content, playing games, and receiving tokens. For example, far.cards is a collectible card project developed based on mint.club, exclusively for Farcaster users, where the attributes of each user's card are determined by their level of activity on Farcaster, such as the number of followers, likes, and replies received. The price of the cards is determined by a bonding curve, and the acquired cards can be collected or traded.

Overall, the Farcaster team is indeed a team that gets things done in the SocialFi track, paying more attention to the social needs of users and being able to develop targeted designs based on the characteristics of the crypto market. This is undoubtedly the key to their future success. In May, Farcaster's developer Merkle Manufactory announced the completion of a new round of financing, led by Paradigm, with a total amount of $150 million, raising the company's valuation to $1 billion. This also represents institutional recognition of Farcaster.

What is the real pain point in the development of SocialFi? A potential value of Farcaster that has been overlooked

In fact, the real challenge in the development of SocialFi still lies in the adoption of crypto. Simply put, the majority of current crypto market users still exist in centralized trading scenarios, and there are still not many users using decentralized applications and tools. On the one hand, fraud is indeed a serious issue. Although many projects initially intended to do things seriously, too many projects ended up running away, and the number of projects that can persist is very limited. This has created the impression of many scams in the crypto market, and users need a process of building trust. Traditional industries can rely on regulation, but the decentralization of the crypto industry makes the risk of wrongdoing very low, which makes it difficult for ordinary users to accept or dare to accept. Additionally, the barrier to entry for using crypto applications is still relatively high and not very user-friendly for the average novice, which is also something that Ethereum's next upgrade is focusing on addressing. Furthermore, I believe that another important issue is that the value created by the blockchain industry itself is still relatively limited, which means that speculation (such as "carpetbagging") is still mainstream, and widespread real application demand does not exist.

I still believe that the blockchain industry is in its early stages of development, and Web3 will still come in the future, which means that users will eventually come in. Under this assumption, Farcaster has a potential value worth noting. The founders of Farcaster were former executives at Coinbase, and Farcaster is closely linked to the Base ecosystem. Jesse, the core person in charge of the Base chain, is very active on Farcaster. Over 70% of on-chain interactions among the top 500 fans on Farcaster occur on the Base chain. Behind Base is the strong support of Coinbase, which is connected to traditional financial markets, which is very favorable for the future development of Farcaster.

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