Tech
What friends.tech’s 90% revenue collapse shows about a dying model – DL News
- SocialFi, a mashup of social media and cryptocurrency trading, exploded in value last summer.
- Friend.tech was doing $10 million a day in trading volume before its sudden decline.
- The founders were quick to capitalize on the early success.
Amico.techa cryptocurrency-based platform that allows users to buy and sell stocks linked to accounts on X, was the most talked about topic last summer.
By September, one month after launch, friend.tech it processed approximately $10 million in trading volume per day.
It had attracted crypto influencers and artists from OnlyFans, an online content site, and spawned more than a dozen imitators. As of mid-October, more than 600,000 accounts had used the site, according to data compiled by pseudonymous analyst Whale Hunter.
In the process, friends.tech has established itself as an innovative new mash-up of social media and trading, a model called SocialFi.
Then the firm hit a wall: Its user base stalled at 800,000 and the protocol’s monthly revenue dropped 90% from its September high to $1 million in December.
Even SocialFi itself, designed to allow users to profit from their followers, collapsed after enjoying a fleeting moment of relative popularity.
A sector collapses
After peaking at $53 million in total value locked and nearly 400,000 transactions per day in October, SocialFi lost more than a quarter of its TVL and suffered a 98% reduction in daily transactions, according to DeFiLlama and the pseudonymous analyst Cryptokoryo.
(Total value locked is a measure of investments locked in a blockchain or DeFi protocol.)
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Many of the industry’s leading lights have dimmed. Active daily trading volume Post.techAffriend.tech clone on the Arbitrum blockchain, has failed to surpass $10,000 since the following November 22 hit $5 million in September, according to Whale Hunter.
Stars Arena, Friendzy, Friend3, Cipher and others have all suffered a similar fate.
“Friend.tech is collapsing because they had a viral image to impress the world and they did it with very few features and mostly promises.”
—Charlie Shrem
SocialFi is the latest cryptocurrency craze to fizzle out after a speculative frenzy petered out, according to analysts who spoke to DL News.
“So far, because SocialFi networks are driven by incentives, they tend to follow the same trend we’ve seen in other industries: DeFi, gaming, etc.,” said Martin Lee, analyst and spokesperson for crypto data provider Nansen DL News.
Escape velocity
“When early adopters start getting high returns, it attracts more people and becomes a strong narrative, but it typically fades before they can reach escape velocity.”
From the beginning, ffriend.tech he was in tears.
Users connect their X account and deposit ETH into a wallet generated by friends.tech, allowing them to purchase shares – later renamed “keys” – that grant access to private chat rooms.
Key prices are determined by a bond curve. Each key sale carries a 10% commission, split between ffriend.techand account X represented by the key.
At its peak in September, its total daily trading volume surpassed $13.5 million in volume on NFT marketplaces tracked on DefiLlama by more than 48%.
According to Charlie Shrem, partner at Druid Ventures, its decline in October was largely caused by a lack of features that kept users engaged.
“Mostly Promises”
“Amico.tech is collapsing because they had a viral shot to impress the world and they did it with very few features and mostly with promises,” Shrem said DL News.
Amico.tech did not respond to a request for comment.
The success of the venture took its founders by surprise. Pseudonym friend.tech Co-founder 0xRacer told Decrypt in August that he and his colleague had “initially shared the app to start load testing and didn’t expect it to go viral.”
When the protocol went viral, the two found themselves playing catch-up, fixing bugs and setting basic policies for the website, they said at the time.
In any case, SocialFi, much like GameFi before it, is now struggling to compete with long-standing incumbents, such as X, formerly known as Twitter.
“Social networks are only as valuable as the users who use them, and at least for now, existing networks like X are still the primary places where high-value accounts spend the most time,” Lee said.
Sharp decline
Avalanche-based Stars Arena, another ffriend.tech clone, suffered a steep decline after being hacked in October.
Daily active users on Friendzy, a Solana competitor, rarely they reach a dozen, according to data processed by Impossible Finance.
Another reason for the collapse could stem from the burgeoning cryptocurrency bull market.
When Bitcoin, Ether and Solana began to rally in mid-October, that may have punctured the SocialFi bubble, said Gabe Tramble, co-founder of crypto research firm Shoal Research DL News.
“It drained liquidity from SocialFi, which was kind of degenerate in the beginning,” he said, using a self-deprecating term coined by cryptocurrency traders.
“BTC and alternatives started moving pretty much when ffriend.tech refused. [friend.tech] it was almost something to do while everyone was bored.
Aleks Gilbert is DL News’ New York DeFi correspondent. Ryan Celaj covers DeFi and cryptocurrency markets. Do you have advice? Contact the authors at aleks@dlnews.com AND ryan@dlnews.com.