Friend.tech Analysis - Top SocialFi on Base
Friendtech is a prominent SocialFi project on Base. The project will soon launch V2 with the aim of bringing users back to the platform.
Overview of Friend.tech
As one of the first mainnet dapps on the Base network, Friend.tech greatly contributed to the development of this network. Although not as hot as the initial time, the launch of V2 can bring attraction back to FT.
Friend.tech's operating mechanism
· 5% of trading volume goes to FT Treasury
· 5% of trading volume for creators
The key here is like a type of ERC-20 issued under the creator's reputation. Even though they are the issuer, KOL cannot mint the key themselves but must buy it on the market like a supporter.
How users make money
Whether you are a creator or a supporter, you can make money when participating in FT:
Creators receive revenue shares from the platform when users buy and sell Keys.
Backers buy the Key and resell it at a higher price. To optimize this, some users use MEV bot to key as soon as possible, front-running the KOLs themselves when the Key has just been created.
Airdrop potential from both FT and Base. FT implicitly confirmed this when launching Points and the Airdrop section in the app.
Key Pricing
Keys on FT are not priced like AMM models but use a curve showing the correlation between price and total supply (bonding curve). The mechanism used to value the Key is shown in FT's contract.
Key purchase price (in ETH) = N^2/16000
Key selling price (calculated in ETH) = (N-1)^2/16000
In there:
N is the total supply of the key, which can increase or decrease depending on the quantity traded:
· 16000 is the expansion factor decided by FT
· Key prices are calculated in ETH
According to this formula, the price will be proportional to the total supply of the Key. The more buyers there are, the more keys floating around in the market, the higher the value of that Key. This creates a scaling barrier for later users. The above model also means that users trade with the FT platform instead of trading with each other.
The profit of the trading key transaction after k additional keys are purchased, will be calculated as follows:
For example:
KOL A today has 100 keys floating on the market, so the price of the key for the next buyer will be: 100^2/16000 = 0.625 ETH. If immediately resold, the selling key price will be: 99^2/16000 = 0.613 ETH.
If the number of keys increases to 120, K = 20. Then the selling user will have profit (excluding fees) as follows:
k(2n + k)/16000 = 20(2 x 100 + 20)/16000 = 0.275 ETH
In short, with the total available supply of N, users can always calculate the amount of K that needs to be purchased in order to make a profitable transaction (net profit greater than 0 after charging a 10% fee). With the assumption that K is relatively smaller than N, the shortened formula is as follows:
Traders are profitable when: K > N/9
With the number N less than or equal to 9, K only needs to be equal to 1 for the trader to make a profit. This is the reason why MEV sniper bots* can make a profit because only one subsequent buyer (possibly the creator) will be needed. profitable.
Similarly, the larger the number N, the higher the amount of K needed to reach the profit threshold after fees. This also means that the larger the project, the harder it will be for traders to make a profit. Then the people who benefit the most are still the protocol and the biggest creators.
Conversely, it is also possible to calculate the total Key supply of a KOL when the price is known with the formula:
Supply = Square Root(price * 16000)
For example, with a Key priced at 2.4256 ETH, the total supply will be 197 keys calculated according to the formula:
supply = Square root(2.4256 * 16000)
Airdrop/Point
The Point program was launched right from the early stages when FT launched. When Point is launched, it will make users use it more, boost the index, thereby increasing the valuation value and the token value when users are airdropped.
Friend.tech metrics
Friendtech had a successful launch period, but limitations in the model made it difficult for the project to expand. With the above model, FT has achieved the following numbers:
· TVL 35 million USD, currently ranked 9th on Base
· 895,440 users have made at least 1 transaction
· Buying volume totaled 251 million USD and selling volume totaled 241 million USD
· 101,847,397 USD in revenue generated, of which 50,923,698 USD was shared with the Creators community.
In the first 3 months, FT successfully attracted the community because it was the first project on Base, with high revenue and profits for many parties. However, this model needs later buyers to increase the key price for users who buy first, which limits scalability.
By November 2023, FT's attraction is no longer enough, the project cannot attract new people, there are no future buyers of keys, causing users to no longer earn money, resulting in the project slowing down. The V2 upgrade is about to be released on April 27, causing transaction volume to increase slightly again but there are still no new users.
The next stage is the time after the launch of V2 (about April 29, 2024). Although FT V2 has not officially launched yet, it has already brought positive changes in trading volume.
Friendtech V2
Friendtech has announced the launch date of V2 on April 29, 2024. This new version promises to launch many new features as well as many implications about the launch of the FRIEND token. A few new features in V2 may include:
· Copytrade by KOL/user
· In-app DEX
· Launching FRIEND token
· Bonding curves in groups or more types of bonding curves
· Many other types of assets can be traded instead of just keys (stickers, hashtags, NFTs...)
· Add subscriptions, search by keyword, notifications...
· Reduced fees, launched new point system.
MEV/Sniper bot
FT's operating mechanism opens up great opportunities for sniper bots, there are 819 bots participating in trading, buying and selling more than 38k different keys, bringing profits up to 15,648,418 USD. Sniper bot has the highest recorded profit of 1.38 million USD.
*Sniper bot: automated tool developed to execute trades quickly according to predetermined market conditions.
Transactions related to Sniper bot. Source: Dune
Some related bots: Friendtech Tracking bot, Friendrekt, FriendSniper…
Other apps
The development of FT also creates the need to develop surrounding amenities:
· Trading platform: FriendMEX
· Tracking portfolio, trending: Octave
· Key Market Cap: Dune
· Check price top key: Dune
Fork projects
Friendtech's model is reused by many projects and forked on another blockchain. Some projects include StarsArena (Avalanche), Friendzy (Solana), Hub3 (Solana), Post.Tech (Arbitrum), Friend3 (BNB)... However, most of the projects have declined and only FT remains. is influential.
summary
Friendtech uses a bonding curve model to price keys. The actual key transaction is also the user trading with the platform, so this model will be difficult to expand and more beneficial to the first mover. Information about the V2 launch project and growth on Base has made users tend to return to Friendtech.
