Farcaster Analysis
In the context of an ever-evolving infrastructure layer, the competitive advantage of blockchains will come from killer apps in the ecosystem. Among them, Farcaster is considered one of the heavyweight names.
Overview of Farcaster
Farcaster is an infrastructure platform for decentralized social network applications (DeSoc - Decentralized Social Platform) with a hybrid structure between onchain and off-chain. Activities such as user identity registration (Id Registry, Store Registry and Key Registry) will be recorded onchain through Optimism. Besides, users can use ENS on the Ethereum network as an identifier.
Social graph interactions such as casting, posting, updating profile picture,... will be stored off-chain through Hubs - a P2P network, to ensure the scalability of the network. At the top is the application layer with more than 30 projects, including infrastructure projects (middleware) and application groups (applications).
Farcaster structure
Overview of DeSoc array
Components of the DeSoc group
According to Coinbase Venture, a Web3 social network project will include 4 main components:
· Applications: groups of projects that users interact with directly, including structures such as many-to-many, one-to-one, one-to-many.
· Profile: project group that connects users to application groups, mainly wallets.
· Social Primitives: middleware project group working on infrastructure, including pieces such as social graph, communication, Identity,...
· Hosting: the project team helps store and provide blockchain infrastructure (L1 & L2) for the projects developed above.
Components of the DeSoc project team. Source Coinbase Ventures
For Farcaster, Warpcast is the key application in the ecosystem with features combining Twitter and Reddit. The Social Primitives layer like Farcaster acts as an infrastructure layer that helps store and connect user interactions on decentralized social networking platforms.
Currently, user data will be stored both onchain and offchain to minimize costs and scalability, but still maintain sufficient decentralization.
Development of DeSoc array
According to Galaxy Research, as of April 2024, the total number of users on Web3 social networks has reached 8.7 million with nearly 550k MAUs. In terms of number of subscribers, DeSo is leading with 3 million people (32%), followed by Cyber Connect, Poap, Phaver.
However, to comprehensively evaluate a Web3 social network, indicators related to user interaction play an equally important role. Currently, Farcaster is the leading name with 150k daily transactions, followed by Lens and Cyber Connect. Looking at the development history of the DeSoc segment since 2022, each growth spurt of the DeSoc project team is led by a specific project:
· Lens and Cyber Connect (March 2023)
· Friend.tech (September 2023)
· Farcaster (February 2024)
According to Messari, the biggest competitors of current DeSoc projects are Web2 social networking applications such as Meta or X. These applications have created a network effect that helps maintain and grow the number of users over time. Time makes it difficult for other social media projects to catch up.
Looking at current DeSoc projects, most grow strongly at each stage and gradually cool down after 3-4 months due to not being able to maintain the number of users. Much of the reason comes from the lack of quality content sources to attract users' attention. From there, there is a lack of sustainable funding or revenue to maintain the network.
However, Farcaster's recent developments such as the introduction of the Frames feature or the $DEGEN airdrop event are showing optimistic signs about this application's ability to develop in the future.
Analyzing Farcaster's development journey
Despite launching in 2020, Farcaster's development has only really exploded recently. Let's look back at Farcaster's development journey:
· 2021: Farcaster V1 launched, reaching 100+ daily users (DAU)
· 2022: raise capital of 30 million USD from a16z at a valuation of 200 million USD, reaching 1k+ DAU
· 2023: Farcaster V2 launched, reaching 5k+ DAUs
· 2024: Launch Frames, reach 50k+ DAU
It can be seen that after launching the Frames feature (February 2024), the number of daily users on Farcaster has grown 20-30 times from 2k DAU to 40-50k DAU at the present time. Activities such as posting (casting) and reacting have also increased dramatically in recent times.
Frames is a mini app that has the ability to interact with users (interactive window) displayed directly on Warpcast's feed interface. Frames/mini apps are considered a gateway to help Warpcast users connect with applications outside of Warpcast, which can be reading blogs, watching videos, minting NFTs, playing Web3 games, participating in quizzes to receive tokens, AI applications,...
Some applications on Farcaster Frame
Currently, Frames can be easily deployed and created with limitless ideas from programmers. From there, expanding a new market, a unique selling point (USP) for Farcaster instead of competing directly in terms of content with traditional Web2.
According to Dan Romero, Farcaster's advantage is its ability to allow creators to distribute content (Frames) directly to all Warpcast users immediately (mass distribution). This makes it possible for creators to continuously test new ideas on the platform.
How Farcaster can create network effects
Over time, when the number of users is large enough, more projects will be attracted to develop Web3 applications directly through Frames. This direction is similar to the strategy "come from the tools, stay for the network" that a16z founder Chris Dixon once said. Currently, there have been nearly 850k Frames created, mainly from mint NFT activities on Zora (~20%). Besides, Frames hackathons are being organized by Farcaster and Base Foundation to find new initiatives on Warpcast.
Besides the Frames feature, the growth in the number of users on Farcaster is largely influenced by the memecoin effect, especially the Degen project. The starting point of $DEGEN is just a community token that is airdropped to members who participate and contribute on the Degen channel. However, this token quickly grew 100 times to a capitalization of more than 2 billion USD after launching Degen chain - a layer 3 blockchain on Base.
Besides, at the end of March, Degen announced that it would launch the season 3 airdrop program for users participating in tipping on the Degen channel. This has attracted a large number of users to Farcaster to participate in the airdrop as well as find projects similar to Degen. An important factor helping memecoin grow in recent times is the Dencun upgrade, which reduced transaction costs on Base by up to 90%.
Although Farcaster and Degen have not publicly announced any relationship, Farcaster's growth figures through the number of casts are influenced by the Degen memecoin. According to data from Dune Analytics, the transaction volume from Frames is largely related to the $DEGEN token.
Correlation between $DEGEN price and activity volume on Farcaster
In essence, social media companies like Meta, Tiktok, and X are all doing business based on a finite resource, which is user attention, and selling it through advertising (attention economy). The use of memecoin is considered a form of business competition for the above traditional companies.
In recent times, memecoin has been seen as a marketing strategy that has attracted great attention from the community, such as Solana, Base or Blast. Variant, a16z, Vitalik funds also presented a thesis on using memecoin as a market strategy (GTM - go to market) at an early stage
Difficulties and challenges for Farcaster
The launch of Frame resonates with the memecoin effect that has fueled Farcaster's growth in recent times. However, whether Farcaster can create a sustainable network effect is still a big question mark.
First, mini app models allow programmers to create applications and features that are not new. Currently, other parties' mini apps such as Telegram Mini App and Discord Bot can also easily deploy external APIs with extremely high creativity.
Miniapps on top of other apps
Besides, Farcaster's Open Frame standard can be deployed on other applications such as Lens or XMTP, reducing the uniqueness of this application. Currently, the Frame feature is still in the early stages of development, some experiences related to interaction between the Warpcast interface and external applications are still limited.
Besides, for a social networking project to be successful like Tiktok or Facebook, the ability to recommend content based on user behavior plays a vital role. It not only helps attract users but also retains them because of content routes that match their interests.
The use of memecoin only has a short-term element that helps attract initial attention. To retain users, it still must come from quality content as well as user experience on the ecosystem. Currently, the content streams on Warpcast are still focused heavily on crypto and are not diverse enough to attract and retain users.
Epilogue
Farcaster's development is showing signs of optimism about new applications surrounding blockchain technology. The Frame feature along with memecoin effects, especially Degen, contribute significantly to the growth of this application.
However, the project still has many things to improve to develop stronger in the future. The development of new technology and a new economy will take a lot of time. Readers should keep an open mind to receive new market changes in the future.
