The crypto world is full of ambitious projects, but not all of them make it. One recent casualty is Phaver, a Web3 social media app that aimed to bridge the Lens and Farcaster ecosystems. Despite raising $8 million from big-name investors like Polygon Ventures and Nomad Capital, Phaver shut down operations, with its token $SOCIAL plummeting 99% since its Token Generation Event (TGE) in September 2024. So, what went wrong? Let’s break it down.

A Promising Start for Phaver

Phaver launched with a bold vision: to create a decentralized social media platform where users could control their data, leveraging Web3 technologies like Lens and Farcaster. For context, Web3 is the next evolution of the internet, focusing on decentralization, user privacy, and self-governance—unlike Web2, where tech giants like Meta or Google control your data. Phaver aimed to merge Lens (a protocol for decentralized social graphs) and Farcaster (a decentralized social network) to build a seamless ecosystem.

At its peak, Phaver was a big deal. It boasted 35,000 daily active users (DAUs) and 800,000 downloads, capturing 50% of Lens traffic and 20% of Farcaster’s. They even raised $8 million at an $80 million valuation, with investors like Polygon Ventures, Nomad Capital, and SwissBorg backing them. A post from Ignas | DeFi on X highlighted their traction, but also their eventual downfall.

The Fatal Mistakes

Despite the hype, Phaver’s journey ended in failure due to a series of missteps. Here’s what happened, according to insights shared by Ignas on X:

1. A Botched Token Generation Event (TGE) and Airdrop

Phaver’s TGE in September 2024 was a disaster. The portal for claiming tokens failed for hours, leaving users frustrated and sparking fear, uncertainty, and doubt (FUD) in the community. On top of that, they released 49% of the airdrop without any vesting—meaning there was no lockup period to prevent immediate selling. This led to a massive dump of $SOCIAL tokens, tanking the price. They also didn’t have a staking pool ready, which could have incentivized users to hold their tokens, nor did they integrate key social features into the app wallet. The image shared in the post captures the team’s own admission of these mistakes:

2. Overpaying for CEX Listings

Phaver spent over $1 million to list $SOCIAL on five centralized exchanges (CEXs) like Bybit, KuCoin, and Gate.io. For a startup, that’s a huge chunk of cash. While getting listed on CEXs can boost visibility, the cost was unsustainable for Phaver, especially since the token’s performance didn’t justify the expense. As Bojan pointed out in a reply, there’s no need to pay for CEX listings unless you have the trading volume to back it up—a lesson Phaver learned the hard way.

3. Poor Cash Flow Management

Perhaps the most critical mistake was their decision not to sell any tokens during the TGE. With FUD already high from the botched launch, the team held onto their tokens, hoping to avoid further price drops. But this left them strapped for cash to fund operations. As a Finnish company, Phaver was also legally required to pay employees during a 1–2 month notice period after shutting down, further draining their funds.

The Fallout

Phaver’s social media accounts are now gone, and the $SOCIAL token is down 99% from its TGE price. Despite the shutdown, some ex-team members are trying to salvage the project by working on ai_socialdao, a new initiative to give utility to the $SOCIAL token. But for now, Phaver’s story is a cautionary tale in the crypto space.

Lessons for Crypto Startups

Phaver’s failure highlights some key lessons for Web3 startups:

• Nail Your Token Launch: A smooth TGE is crucial. Vesting schedules and staking mechanisms can prevent price dumps and keep users engaged.
• Manage Finances Wisely: Overspending on things like CEX listings can bleed a startup dry. Focus on sustainable growth instead.
• Plan for the Unexpected: Phaver’s cash flow issues were exacerbated by Finnish labor laws. Startups need to account for legal and operational costs in their planning.

The Bigger Picture: Web3 Social Media

Phaver’s shutdown doesn’t mean Web3 social media is doomed. As DeFi Dad noted in a reply, the space still feels “weirdly early” but has a committed user base. Platforms like Lens and Farcaster are still growing, and the idea of decentralized social media—where users own their data and creators can monetize directly—remains compelling. Social tokens, as discussed in a Cointelegraph article, could play a big role in this future by enabling direct tipping and creator compensation without intermediaries.

Phaver’s story is a reminder that even promising projects can fail if they don’t execute well. But the Web3 social media space is still evolving, and there’s plenty of room for new players to learn from Phaver’s mistakes and build something better.