In the wake of token economics, Friend.Tech social platform emerged as one of the most prominent applications in the SocialFi field in August 2023. The platform provided influencers with a unique opportunity to tokenize and trade their social influence. While gaining significant attention, the platform’s token economy model and business strategy faced significant challenges.

In this report, we conducted an in-depth analysis of Friend.Tech’s rigid token economy model by combining insights from on-chain data analysis. We found the following:

1. The exponential price increase of the token brought substantial profits to influencers, but it also limited the size of their fan communities. Approximately 99.94% of token holders held tokens within the range of 0-100, with token prices mostly below 4 ETH.
2. The rigid pricing mechanism of the token led to a rapid decline in trading volume once the token price reached a high level. The average daily trading frequency peaked at 7 times on the first day but subsequently dropped to 1 time or less. The long-term profitability prospects of the current token economy model are uncertain.
3. The explicit arbitrage opportunities in the token economy model attracted a large number of speculators and trading bots, contributing to 90.6% of the platform’s total trading volume. However, only 22.1% of speculators were “smart money” with positive returns, half of which were earned by 14.2% pure speculators without binding social accounts.

In conclusion, after a thorough analysis of Friend.Tech’s market performance, user behavior, and core economic logic, we offer the following comments on the current issues and prospects of Friend.Tech:

1. Friend.Tech’s economic model has low sustainability. The high holding costs and low profitability after the token price increase may discourage users and inevitably lead to a decline in trading volume. To maintain platform activity, the project may need to rely on acquiring new users, but the sustainability remains to be observed. A simple improvement could be to charge a low percentage fee on high-priced Keys to ensure profitability while maintaining trading volume.
2. Friend.Tech may have potential for development in social functionalities. Firstly, the arbitrage opportunities of the token may promote user-initiated promotion of the project. Secondly, the connections between users are relatively tighter compared to other social platforms, and they are more inclined towards reciprocal behaviors, demonstrating a good example of the SocialFi model. However, there is room for improvement in user experience and the risk of being replicated in the business model may affect its prospects.

We hope this report provides valuable insights for the future development path of the Web3 industry.

Link to Full Report

The content of this webpage is not an investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial circumstances. Investment involves risk.

The work described in this article was supported by InnoHK initiative, The Government of the HKSAR, and Laboratory for AI-Powered Financial Technologies.
(AIFT strives but cannot guarantee the accuracy and reliability of the content, and will not be responsible for any loss or damage caused by any inaccuracy or omission.)