SocialFi & The Rise of Friend.Tech
What is Friend.tech?
Friend.tech is a new social platform on Base (Coinbase’s native blockchain) that allows you to buy “keys” of other users. This gives you the ability to chat with other users, granted that you own their keys. The platform launched on August 10, 2023 and is a progressive web app, allowing it to bypass being listed on the Apple AppStore and Google Play Store. A week after launch, Friend.tech revealed that they raised seed funding from Paradigm earlier this year; this caught the attention of those in crypto.
Friend.tech profiles are linked to profiles on X (Twitter), and each Friend.tech account that is created has keys associated with it. The platform allows you to buy keys of other X users (denominated in Ethereum) - whether it be friends, influencers, or creators. Key holders then have direct access to chat with the person whose key they purchased (will be referred to as key masters for the purpose of this article). Key masters are then able to reply with texts, links, and images. The unique feature about the chat function is that all key holders are aggregated into one chat room that belongs to the key master, but only the key master is able to view messages sent by their key holders. Key holders are only able to view other key holders’ messages if the key master chooses to specifically reply to those messages from key holders. If a key master does not directly reply to a message from a key holder, that message would remain private and invisible to other key holders in the chat room.
Many have compared Friend.tech to OnlyFans due to the need to purchase a “membership” to interact with certain users. Initially, much of the crypto crowd were skeptical of the viability of such a platform, as it sort of replicates that of a paid private group which some KOLs run and promote. Despite this, the platform started to gain traction. The popularity of Friend.tech could arguably be attributed to the promised airdrop for active users of the platform, as activity on the platform generates users points which users all anticipate will translate into an airdrop for Friend.tech tokens down the road (rumored to be in ~6 months). There is also the aspect of buying keys as a speculative investment if you anticipate a certain user will draw in huge buying demand for their keys; key price goes up and you would be able to sell for a profit. Upon selling, you would no longer have access to that user’s chat room. As crypto traders make more speculative investments and trade keys, the capital more often than not tends to stay within the Friend.tech ecosystem. Traders would then continue to use their profits to buy other keys and vice versa. From the looks of things, Friend.tech appeals to a few types of users
1) Users using it to trade keys and flip for profits
2) Users interested in gaining exclusive access to their favorite creators
3) Content creators
It’s been a month since the platform went live, and Friend.tech has gained lots of traction since then. Some crypto KOLs are actually being more active on the platform as opposed to X. Many have cited the reason being that it allows them to share their opinions more freely with a tighter-knit audience. The idea of having a closed community appeals to many, given the negativity that crypto does tend to have towards creators and larger accounts sharing their thoughts, particularly during periods of dry liquidity like the one we are currently in. It limits spam and only allows for certain messages to be viewed by everyone in the chat room. Having the exclusivity also increases the odds that key holders genuinely value the key masters’ thoughts and find some value in being able to interact and learn from them. Additionally, creators are able to generate fees from the platform when users buy and sell their keys. This could be viewed similarly to NFT creators early in the day when creators would be able to earn royalties off sale - the appeal for both creators and general users is there.
Friend.tech Key Prices and Points
Friend.tech uses a bonding curve whereby key prices increase and decrease based on the number of buys and sells that occur; forces of supply and demand. There is a seemingly infinite supply of keys that can be bought; as more keys are bought, the price increases.
Source: X user @spacepixel
Each key buy and sell incurs a 5% tax each way, and there are currently no measures in place to prevent key masters from buying their own key to artificially pump the price of their keys and create volume to appear on the “trending” leaderboard. However, this does not have much benefit as Friend.tech recently eliminated the contribution that self-bought keys have towards earning points on the platform. This then leads many to wonder, how are points calculated?
There currently isn’t a clear formula for how points are calculated, and the Friend.tech team has been adjusting the formula every week to continue working towards encouraging positive organic behavior in the Friend.tech ecosystem. Many have speculated that factors that play a role in earning points include: portfolio value, key holding time, key holding count, and chat activity. Ultimately, the goal of Friend.tech looks to be fostering positive relationships in communities between key holders and key masters, and one can only assume that the points system would continue to steer in this direction.
Friend.tech by the numbers
It’s been about a month since the release of the platform, and the numbers have been very promising. Friend.tech has already amassed $40mil in TVL, $29mil in fees, and $15mil in revenue. This annualizes to $263mil in fees and $131mil in revenue. The platform has also attracted a total of 250k+ users of the platform.
Source: DefiLlama
The large question that looms is, how long would Friend.tech be able to sustain its user base; would it have been able to generate these impressive numbers if there was no anticipation of an airdrop? When Friend.tech initially launched, there was the (3,3) meme that was circulating around - for those who were around during the OlympusDAO ($OHM) days, you might be familiar with this concept. To put it simply, this concept revolves around the notion of “you buy my keys, I buy your keys; you hold my keys, I hold your keys”. The (3,3) idea was relevant to Friend.tech as people speculated that the points were attributed to the number of buyers and holders you had for your keys. The problem with this is that it continues to work, until it doesn’t.
At the end of the day, people are in it to make money - if a key you are (3,3)-ing appreciates in value, it’s likely you’ll choose to sell and take the profits. Obviously, this may not necessarily have the most organic impact on the FT ecosystem, so it wouldn’t be a surprise if the team decides to do something about nerfing points in relation to the concept of (3,3).
There was one of the weeks where points distribution was relatively low compared to those of the previous weeks (either week 3 or 4) and users were not very happy with the low number of points they received. This led to a decline in TVL (only for a few days) - users were selling off keys and many were calling it the end of Friend.tech. As we know, the attention span of the current crypto participants is that of a goldfish, and this small bump in the road just proved to be a buying opportunity on cheap keys and TVL shot back up in no time. Moments like this help to show that maybe Friend.tech does have some sort of stickiness, especially if they continue to flesh out available features on the platform.
Friend.tech Improvements and Growth
Given that Friend.tech launched as the first mover in its sector, it has managed to grow out its network of users purely by being the first. Given that many of crypto’s largest KOLs have already on-boarded onto the platform, it is less likely that they decide to move to another platform given their already built-out community on Friend.tech. However, there are still many gaps that the platform can fill to further grow its offering to users as a product that positions itself around the community. Founder 0xRacer has already hinted at a referral system and expanding beyond linking a Friend.tech account only with X profiles (Reddit has come up as a potential platform to link profiles with). Additionally, there could be the opportunity to explore product features such as, key holder rewards system, key lockups (staking?), or even fiat on-ramp/off-ramp to attract non-crypto-natives to the platform. There are a multitude of ways the platform could continue to build out the idea of creator monetization through communities and fostering relationships.
With that said, there are already other projects in the market looking to build out Friend.tech ecosystem tools, such as a portfolio dashboard, key price charts, a key holder loyalty system, as well as an interest / community-finder function to help users find new potential creators whose keys they would like to purchase.
Friend.tech Competitors & Risks
Since Friend.tech launched, there have been many competitors that tried to capture some of their market share. However, the majority of them have failed to do so - most notably SharesGram and Shares.finance. With that said, it has not stopped others from coming up with platforms to compete. Friend.tech-like platforms have recently launched on other blockchains - Friendzy on Solana, Post.tech on Arbitrum, StarShares on Avalanche, and Fan.tech on Mantle. The key difference though, is that Friend.tech has the backing and capital support from one the the largest VCs in the crypto space. The appeal of the Friend.tech airdrop and the already built out communities just might be enough to create enough stickiness for users and creators to stay, for now.
In terms of risks, there are a few factors that pose as risks to Friend.tech, including:
1) Hacks
Friend.tech keys are supposedly stored on the frontend (Source: 0xngmi), which makes it vulnerable to supply attacks and users risk losing their key portfolios if this does occur. However, the wallet associated with users’ FT accounts should be relatively safe as long as users export their FT wallet to external wallets and practice proper wallet risk management.
2) Compromised X Accounts
Users should appropriately disable FT app permissions access to their X accounts to mitigate the risk of losing their X accounts entirely.
3) Competition & User Fatigue
The airdrop is still months away, and if competitors are able to release better platforms that incentivizes creators and users alike to switch over (maybe even their own airdrop), it could potentially spell danger for Friend.tech. Months in crypto feel like years - and if the creators and users begin to feel boredom with Friend.tech, they could very well turn to the new shiny project that hits the market.
SocialFi
The entire concept of SocialFi has to move away from prioritizing what we typically see amongst crypto projects - which is a focus around making money. The basis of SocialFi is to prioritize communities and community management, hence this has to be the focus for SocialFi products; product first, money second. As Friend.tech is still relatively new, it is hard to judge the direction that it is going in, but so far it does seem like they are prioritizing the product’s intended focus which is to build out communities and foster positive relationships.
Conclusion
No one knows what will happen to Friend.tech in the medium-long run, especially after the airdrop is distributed. Given the existence of multitudes of private groups and the existing usage of different platforms by crypto natives (X, Telegram, Discord), it may be a bit of a stretch for users to manage another additional platform. It could be the case whereby Friend.tech still exists as a platform for users to buy/sell keys, but many of the activity and chats could be migrated off Friend.tech and onto other messaging apps such as Telegram and Discord after the airdrop. The gated functionality would still work by connecting the 2 platforms, but chat activity could migrate off just due to convenience for most users.
At the end of the day, we would not advise crypto users to fade Friend.tech. The platform is still in its early stages and the team is constantly looking to improve upon the product and how keys work. As they say in crypto, your network is your net worth; Friend.tech provides an opportunity for all participants to build out and strengthen their network within the space. After all, there is also an opportunity to earn an airdrop, and why would one turn down free money.
Thank you for reading our Friend.tech project overview, and thank you to the brilliant folks at Twitter and DefiLlama for their work that helped contribute to this article. If you enjoyed this piece, be sure to subscribe to our Substack and give our Twitter a follow.