With dismal real user numbers, is Farcaster—funded $150 million—a scheme VCs set up for LPs?
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With dismal real user numbers, is Farcaster—funded $150 million—a scheme VCs set up for LPs?
Farcaster's user count doesn't justify its valuation—could it be that behind the large funding rounds, VCs are taking LPs' money and refusing to give it back?
Navigating Web3 tides with focused insightsAuthor: Liron Shapira
Translation: Foresight News, Alex Liu
Farcaster is a crypto/Web3 version of a mini Twitter—how did it raise $150 million at a $1 billion valuation?
Dune Analytics shows Farcaster has 45,000 daily active users (DAU). That number isn't impressive—it's practically negligible within the social category. Worse, that figure is even inflated by spam bots.
Evidence that Farcaster has around 5,000 DAU:
I believe Farcaster’s real DAU is between 50 and 5,000—not the 45,000 shown on Dune Analytics.
Farcaster’s official client has a public API endpoint to “get all power badge users,” which roughly corresponds to genuine, non-spam DAU. This API returns exactly—4,387 users.
Imagine valuing a social network at over $200,000 per user 😂
What kind of content do users mainly post on Farcaster?
Picture reading a crypto-themed Discord server, but redesigned to look like you're browsing Twitter.
And what I see is partly from real users, partly from AI-generated spam bots.
People point out Farcaster has an amazing feature called "Frames," which works similarly to Facebook Canvas—a feature Facebook launched in 2007 and discontinued years later.
My response is simply: Is there a compelling use case?
@dwr (Farcaster developer) on this topic:
Question: What's the coolest app built on Farcaster?
Answer: I love all ecosystem projects equally.
Does Farcaster align with the Web3 spirit?
Chris Dixon of a16z said: In Web3, you don’t rent—you own.
Farcaster: Users must pay Farcaster “rent” to store their data—currently about $7 worth of ETH for every 5,000 posts. If users refuse to pay, their old posts get deleted when they publish new ones.
Why would VCs like a16z find a $1 billion valuation attractive for a startup whose active user base is comparable to a niche Discord server?
Have we suddenly entered another crypto bubble where everyone becomes paper unicorns again?
I think there are three explanations:
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It’s like Clubhouse
In 2021, a16z valued Clubhouse at $4 billion. That bet didn’t pan out, but the logic made sense.
Social platforms can grow to valuations over $100 billion. If VCs see even a 10% chance of such an exit, they can justify valuations above $1 billion.
Compared to Clubhouse’s user count when it was valued at $4 billion in early 2021, Farcaster has only 0.1%—and that was already an extremely speculative valuation.
But in my view, the real reason is darker…
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Crypto VCs take LP money and don’t want to give it back
If VCs still have LP capital to deploy, “investing $150 million” instead of returning it means they can charge an extra $20–30 million in management fees for themselves.
2% annual fee × 10 years = 20%.
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The Web3 space is like Bernie’s weekend
By now, everyone realizes “Web3” is a logically flawed concept.
But the VCs who wasted billions don’t want to admit failure—and face lawsuits.
Farcaster lets them keep up the charade. If you squint hard enough, you can see a Web3 use case!
The bull case for Farcaster is that it’s a protocol like RSS, enabling interoperable microblogging across the open web.
In my opinion, that’s a worthwhile idea to explore. Although similar attempts like Mastodon haven’t seriously threatened Twitter.
Let’s wait and see🍿
I think Farcaster is doing well—the $4 billion valuation is based on team, execution, and appeal.
But the point of this article is that setting a valuation above $1 billion before even having a path to 500,000 DAUs is so unreasonable that something is deeply wrong with VCs—they’re either scamming or simply incompetent.
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@liron
