The promising narrative of SocialFi stalled in Q2, led by the decline in Friend.tech (FRIEND) usage. Formerly a hot asset, FRIEND also crashed, reflecting the low usage of the decentralized social media trend.
SocialFi was among the promising trends of 2024, aiming to revive a fee-based economy with an element of social media. SocialFi replaced older attempts at content generation with the potential to earn crypto and share fees and earnings. A handful of new SocialFi projects launched in late 2023, focusing on content-generating communities.
FRIEND founders tapped new users for exit liquidity
Friend.tech (FRIEND) dominated the sector while quickly becoming a fat-fee app. However, the project saw all activity flow out in just one quarter, as the founders tapped new users for exit liquidity. The quick slide of FRIEND tokens also discouraged users, especially the ones capable of providing content. Friendtech ended up losing its source of fees and only existing with limited content in the last remaining clubs.
At its peak, Friend.tech reached nearly 84K wallets, tapping the audience of the Base blockchain. SocialFi was considered one of the peak use cases for Web3, especially for low-fee networks like Base. SocialFi was a booming narrative with a handful of promising projects, which expanded its value locked in late 2023. All SocialFi projects drew in $53M during the early stages of the 2024 bull market.
Only a handful of SocialFi projects gained prominence, but Friend.tech dominated the market. Other prominent Web3 content hubs included Cipher and The Arena. More than 50 SocialFi projects appeared in the first half of the year, but currently they are all in freefall, losing between 20% and 85% of their value locked.
The SocialFi narrative was quickly replaced, especially after several market crashes. The crash was also precipitated by the overwhelming influence of Friend.tech. The project’s co-founder, known as Racer on social media, expressed plans to move the platform from Base to another chain. This announcement led to the initial outflow of users, causing the whole sector to spiral.
Racer’s persona also led to the loss of credibility for Friend.tech. Many crypto insiders joined the project, based on the promises of high fee generation and profit-sharing. At one point, Racer was considered the Mark Zuckerberg of crypto, during the best growth days of SocialFi. As of August 2024, Racer’s account was actually among the only ones active on the Friend.tech network. Just a year ago, Friend.tech was tapping long-running crypto influencers like @cobie, turning them into top accounts with SocialFi influence.
Friend.tech shows signs of attempted relaunch
During its heyday, Friend.tech was considered capable of becoming a unicorn among Web3 products. The project reached more than 37K daily active users at its peak, while claiming bigger scalability potential. Soon after that, Friend.tech slid to fewer than 200 daily active users, with a handful of true believers driving activity.
Even during peak times, the project’s founders and a handful of leading accounts managed to extract value from Friend.tech, as the project favored early supporters. This time around, it may be more difficult to propose the same model, as SocialFi is seen as a potential money grab and a slow rug pull.
The FRIEND token is down from a peak above $3 to a current level of $0.19. The extremely low price has led some to return to FRIEND as a potential wild card, capable of expanding on expectations that the Friend.tech project may return.
Recently, investor Jeffrey Huang raised the question of migrating Friend.tech to either Blast or Solana. Huang, also known for his social media persona, Machi Big Brother, has already taken hefty losses on FRIEND. Despite this, in the past days he returned as a whale to buy up more FRIEND at the lowest possible price. On-chain data shows Huang added more FRIEND, spending more than $16M. But the buying may not be enough to revive SocialFi, as Huang has poured funds into crashing tokens before, taking losses on APE and BLUR.
Friend.tech users also took losses on Keys, an asset that had to be acquired to participate in the decentralized social media. Key trading included bot buying frenzy, but in the end Keys also lost value quickly and became worthless. At this point, the relaunch of Friend.tech is improbable, but hype and promises of an airdrop may repeat the initial frenzy.
Cryptopolitan reporting by Hristina Vasileva
