Farcaster: Analysis of the decentralised social protocol

Today, the centralisation of social networks is giving rise to growing concerns about censorship, personal data management and surveillance. As a result, interest in decentralised social networks has grown exponentially in recent years, particularly since Elon Musk's controversial acquisition of Twitter in 2022 (renamed X). Recently, the arrest of Pavel Durov, founder of Telegram, has also reignited concerns about freedom of expression, as highlighted by Vitalik Buterin.

Farcaster is positioning itself as an innovative alternative solution. What's more, its recent funding round, having raised $180 million, including $150 million in a Series A round in May 2024, and the rapid increase in its user base, from a daily active user base of 5,000 in 2023 to 50,000 in 2024, show that the platform is growing fast.

These elements make an analysis of the protocol all the more relevant to understanding Farcaster's potential impact on traditional social networks, as the launch of its token and a potential airdrop draw closer.

What you need to know 🐳

Farcaster is a decentralised protocol designed to enable the creation of social networks. Its technical foundation is based on Ethereum's layer 2, Optimism, where it manages identities and social interactions in a decentralised way. Developers can also create applications, such as Frames, and deploy them on other compatible layer 2 solutions, such as Base, strengthening the protocol's interoperability.

Farcaster stands out for its hybrid approach to data management, combining on-chain and off-chain elements to maximise security and performance. This architecture is managed by a network of nodes, without centralised control, ensuring true decentralisation.

Farcaster's governance is based on the "rough consensus" model. Changes are made when someone proposes a change, gets buy-in and deploys the corresponding code. Most changes go through the "Farcaster Improvement Proposal (FIP)" process, inspired by Ethereum's EIPs and Python's PEPs, allowing anyone to propose changes to the protocol.

As a decentralised alternative to traditional social networks such as X, Instagram and Facebook, Farcaster gives users full control over their data and digital identity. The network has gained popularity thanks to innovative features such as "Frames", interactive mini-applications integrated directly into publications, enabling users to interact with content without leaving the platform. This offers an enriched experience, comparable to a Chrome extension for social networks.

Overview 🧬

Farcaster was founded in 2020 by Dan Romero and Varun Srinivasan, former Coinbase employees. The protocol aims to revolutionise social networks by offering a platform where users hold full control over their data and interactions.

The network is based on a hybrid architecture. User identity information is stored on-chain, while interaction data, such as posts, is stored off-chain via a network of nodes called Hubs. This structure enables Farcaster to combine the security and transparency of blockchain with the performance of off-chain systems.

Farcaster also stands out for its unique features. Channels allow users to group together around specific topics, encouraging targeted discussions and creating dynamic communities around shared interests. Frames offer interactive mini-applications directly in the social feed, allowing users to interact with content, such as buying NFTs, taking part in games or answering polls, without leaving the platform. Finally, the apps make it easier to manage accounts and interactions, offering personalised tools for browsing and engaging on the network, while reinforcing Farcaster's decentralised ecosystem.

Financing 💰

Farcaster has raised a total of $180 million through two rounds of funding:

• July 2022: $30 million, with participation from 20 investors such as a16z, Coinbase Ventures and Multicoin Capital.

• May 2024: $150 million in a Series A, with a pre-IPO valuation of $1 billion, led by 6 players such as a16z, Paradigm, and Union Square Ventures.

Team and community 👾

Farcaster's team consists of 12 full-time employees and 2 part-time consultants, spread across Los Angeles, New York, San Francisco, Austin and other locations. It is also open to external contributions, inviting the community to get involved, whether by looking for solutions to problems identified in their GitHub repositories or by making an appointment with one of their developers. Today, Farcaster has more than a hundred contributors who have helped with the project.

Since its creation in 2020, Farcaster has attracted a growing community of more than 650,000 users and more than 438,000 connected addresses.

The community is vibrant and active, with more than 148,000 subscribers on X. The daily active user base has grown from 5,000 in 2023 to 50,000 in 2024, testifying to the growing commitment around the platform.

Functioning ⛓️

Farcaster stands out for its hybrid architecture, which combines the advantages of blockchain security (on-chain) with the performance and efficiency of off-chain operations (off-chain).

On-chain

Some important actions for security and transparency are performed on-chain, on the Ethereum blockchain via the Optimism network. These actions include:

• Identity registration (Id Registry): When an account is created on Farcaster, a unique identifier (fid) is assigned to the user's Ethereum address, establishing a secure digital identity that is interoperable across all social networks built on the protocol. This process, registered on-chain, guarantees not only identity security, but also resistance to censorship and user autonomy. By managing their decentralised identity, users can be assured that every message they post is authenticated and recognised as coming from their true identity, no matter which decentralised social network they are on.

• User Name Management (ENS): Farcaster uses the Ethereum Name Service (ENS) system to manage user names. Users can choose between off-chain names, which are free and controlled by Farcaster, and on-chain names, which are paid for and controlled directly by the user's wallet. This dual approach offers both accessibility and control, allowing users to secure their identity while benefiting from the flexibility of off-chain names.

• Key Registry: Users can generate specific keys for each application they interact with on Farcaster. These keys are managed on-chain via the KeyRegistry contract, ensuring that only authorised applications can act on behalf of the user. This strengthens account security while allowing flexible use of applications.

Off-chain

The other aspects of Farcaster's operation are managed off-chain, i.e. outside the blockchain.

• Storage of user data: the majority of data linked to social interactions, such as publications (called "casts"), replies, reactions and relationships between users, is stored off-chain on a network of distributed servers called "Hubs". These Hubs play a major role in continuously synchronising data to ensure the integrity and availability of the network.

• Social interactions: Actions such as posting messages, updating profiles and interacting with other users are also managed off-chain. This choice enables Farcaster to minimise transaction costs, which would otherwise be too high if each action had to be recorded directly on the blockchain.

• Hub synchronisation: The Hubs, which store and validate user data, communicate with each other to ensure that the state of the network is always up to date. This synchronisation is a key process for maintaining data consistency across the entire network.

Business model 💼

Farcaster features a business model based on storage fees. Users of the platform pay an annual subscription fee of $5 (€6 with VAT) when downloading Warpcast, its main social network, which allows them to publish up to 5,000 posts, make 2,500 reactions and follow 2,500 accounts. This fee covers the cost of storing user-generated data and is used to fund the running of the platform without recourse to advertising.

This business model also helps to limit spam, by creating an effective financial barrier against abuse of the system. In addition, customers who build applications on Farcaster, such as Warpcast, can add their own fees, such as a $0.01 cost per post.

Also, users must pay blockchain transaction fees for certain actions, such as those performed via Frames. Although the use of Frames is not directly monetised by Farcaster, they do offer potential for economic expansion.  It is worth noting that the majority of transactions by Farcaster users are carried out on Layer 2 Base (read our analysis), developed by Coinbase, due to its low transaction costs.

Thanks to this business model, Farcaster is able to finance itself on a sustainable basis. Indeed, by the summer of 2024, the protocol had exceeded $2.17 million in cumulative revenue since its launch.

Risks 🥵

Farcaster, while innovative and promising, presents several risks.

One of the main challenges is its scalability. Indeed, its hybrid architecture, which combines on-chain and off-chain elements, could struggle to maintain high performance in the face of a growing number of users. For example, if the number of hubs needed to synchronise data does not increase significantly, problems could arise. If these scalability issues are not resolved, it could lead to latency, a poor user experience, and potentially limit widespread adoption of the platform.

In addition, although Farcaster is designed to be decentralised, a concentration of Hubs (the servers that store off-chain user data) in the hands of a few entities could introduce a point of centralisation, compromising the network's goal of decentralisation.

Also, Farcaster could face long-term financial challenges, compromising the maintenance and development of the platform. While the absence of advertising is an advantage for privacy and user experience, the current model based on storage fees may not be sufficient to ensure the economic viability of the platform.

Ecosystem 🤝

Farcaster's ecosystem is made up of various social networks that have developed there, as well as numerous applications, tokens and NFT collections.

Among them, Warpcast, Farcaster's most popular social network, offers a user experience similar to Twitter and Reddit, allowing users to post 'casts', reply, recast and interact with other members. They can also use 'Frames' for interactive experiences.

Dan Romero, the founder of Farcaster, as well as Vitalik Buterin, are active figures on this social network. On Warpcast, everything a creator publishes is distributed to their audience, unless they decide to unsubscribe, with no intermediaries interfering with this connection.

Warpcast stands out from its competitors through an extremely simple and accessible onboarding process, based on account abstraction. This allows users to create an account with a simple download of the application from the Apple App Store or Google Play, using only an email address. This approach facilitates access for all users, whether new to or familiar with decentralised technologies, and eliminates the need to understand the complexities of digital wallets.

This ecosystem is not limited to decentralised social networks; it also includes NFT applications and collections. These include Highlight, a platform for creating and collecting digital art, and Icebreak, a privacy-preserving professional network.

A number of tokens have also emerged around the Farcaster ecosystem. These include Degen ($DEGEN), a memecoin launched on Layer 2 Base, which Warpcast users can use to reward content creators. The Farcaster ecosystem also includes the NFT Farcats collection, a unique series of 1,661 digital images of cats, which serves as the mascot for the Farcaster protocol.

The Farcaster token? 🌕

Farcaster does not yet have a native token. However, its recent $150 million Series A funding round could foreshadow the upcoming launch of a token.

Regulation ⚖️

At present, as Farcaster does not (yet) have a token, the project does not face any particular regulation.

However, by evolving in areas such as data protection and compliance with digital asset laws, the protocol is not immune to future legislation that could be put in place to frame blockchain technologies, cryptocurrencies or social networks.

Roadmap 🗺️

Although Farcaster released its roadmap for the following year in 2023, including elements such as a new contracts space, Farcaster Wallet and a Turing-complete social protocol (which can perform tasks as complex as a computer), the protocol has since shared no updates on its future plans.

Competition ⚔️

Farcaster's main competitors in the decentralised social networking space include:

1 - Lens Protocol: A decentralised social networking protocol based on a social graph built on the Polygon blockchain. Lens Protocol allows users to own their profiles and use them across different social applications, facilitating the portability of digital identities within this social graph. With a total of 40,270,161 transactions and 428,115 registered users, Lens is showing increasing adoption in the decentralised social network ecosystem. The Lens economy generated a total of $7.3 million.

2 - DeSo (Decentralized Social): DeSo is a blockchain specifically designed to support decentralised social networking applications. DeSo enables content creators to own their data, subscribers and interactions directly, thanks to a blockchain infrastructure optimised for storing large volumes of social content. DeSo boasts an impressive 123 million transactions and a total of 4.8 million users (wallets), making it one of the major players in this field.

3 - Friend.tech: Positioned at the intersection of social networks and DeFi, Friend.tech offers a unique experience where users can not only interact socially but also monetise their influence. On Friend.tech, users' profiles are represented by 'keys' that others can buy and sell, turning every interaction into an investment opportunity. Friend.tech has recorded a total of 14,102,646 transactions and has 905,523 unique subjects. Since its inception, Friend.tech has distributed $44,669,526 in revenue to creators. To everyone's surprise, its development team made the decision to shut down the project on 8 September.

Conclusion 🐳

Farcaster is positioned as one of the leaders among decentralised alternatives to traditional social networks, offering users total control over their data and interactions.

With its hybrid architecture, which combines security and performance, as well as innovative features such as Channels and Frames, Farcaster has the potential to redefine the way users interact online. In addition, its ease of registration and fluid user experience could facilitate its adoption by a wider audience.

However, the relevance of its business model based on storage fees remains to be demonstrated in the long term. Although this model has enabled Farcaster to generate $2.17 million in revenue since its launch, the question remains: will this be enough to cover its long-term expenses? The application could also face challenges related to scalability and mass adoption. The financial viability of the platform will likely depend on its ability to attract a wider audience beyond the current core Web3 community.

In addition, with the rise of the SocialFi trend, many competing solutions are emerging. Farcaster's longevity within this ecosystem will therefore depend on its ability to remain attractive and offer innovations that will appeal to users because of their cutting-edge nature.

Finally, Farcaster's success will also be based on its ability to overcome the technical challenges associated with decentralised data management and avoid the risks of centralising Hubs.

Therefore, if Farcaster manages to adapt its business model to generate enough revenue to cover its expenses, while offering an accessible user experience and continuing to innovate, it could position itself as a key leader in the future of decentralised social networks.

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