Friend.tech Platform Experiences Influx of Bots and Speculative Games

After experiencing a peak that made it the top-earning service provider in decentralized finance, a once-exciting social-media project for digital-asset traders is now losing its momentum and fading away during an otherwise uneventful summer.

It’s called friend.tech, a blockchain-based platform that allows users to buy and sell digital tokens linked to their favorite influencers on X (formerly Twitter), which act as a gateway to communicate with other supporters in dedicated group chats. Early contributors to the platform include crypto personalities such as Cobie and HsakaTrades, as well as Milwaukee Bucks basketball player Grayson Allen and Y Combinator CEO Garry Tan.

Less than two weeks after its Aug. 10 debut, payments from friend.tech — where 10% of every branded purchase or sale is split between the influencer and the platform — reached nearly $1.7 million, according to DeFiLlama data. That high reached on Tuesday made friend.tech the highest-grossing platform after the Ethereum blockchain itself, and the app has collected around $7.5 million in payments since its launch as of Friday. manager 21.co.

But as quickly as its rise began, the hype soon died down. Payments began to decline and by Friday were almost 70% lower compared to Tuesday’s peak. The number of new users who joined the platform daily also decreased, while on Friday there were only 4,484 of Monday’s 20,360 new accounts – a decrease of almost 80%. The exact reason for friend.tech’s demise is still unknown, although a report by crypto research firm Messari noted user complaints of “high transaction fees, slow load times, and a steep pricing curve” that determine how friend.tech’s tokens are valued. .

friend.tech’s premise is based on the large role people on platforms like X play in the success or failure of new crypto startups, making them attractive targets for commercialization. Social media is also a controversial area of crypto development, with launches in the past year including Aave’s Lens Protocol and Twitter founder Jack Dorsey’s BlueSky.

But so far, friend.tech has proven to be subject to the same speculative mania that often leads to new crypto projects, making it more of a Dogecoin than a vibrant social media platform. Even venture capitalists wonder if every idea requires some degree of speculation to succeed in today’s market.

“The nature of crypts is baked in as a characteristic of ownership. It’s an alternative to the advertising model that drove the tech giant,” Simon Taylor, chief strategy officer at anti-fraud startup Sardine, said in a post. “The benefit is more privacy and potentially growth. The risk is speculative games.”

Problems with teeth formation

Friend.tech operates on Coinbase’s new blockchain network, Base, whose early success represents a rare bright spot in a chain that has been plagued by token scams since its launch. A dramatic spike in activity, mostly generated by automated trading bots seeking to capitalize on friend.tech’s meteoric rise, also lifted Base’s transactions per second to briefly surpass Ethereum.

The app has also started attracting content creators from platforms like OnlyFans, a subscription-based service that also allows access to private group chats and exclusive content. But even in its short life, friend.tech is already having problems.

Developers at friend.tech rebranded the influencers, originally called shares, as “keys” on Monday — a move likely to try to get them out of securities regulations after eagle-eyed lawyers noted a potential overlap with existing rules from U.S. regulators. to suppress such assets. Merchants have also criticized friend.tech’s lack of a privacy policy, which is a basic requirement for any modern platform.

According to 21.co’s Tom Wan, the same bots that led to the event spike in friend.tech are the most influential in the platform’s subsequent decline. Automated bots can manipulate the order of events, so when an influencer tries to make their first key, the bots get ahead and buy it before them at the lowest possible price. The content creators are then forced to buy their keys at a higher price from the market, hindering them in the process. The same can happen in the secondary market, where legitimate users have to pay a higher fee to acquire the same share.

Track record

Some have compared friend.tech’s model – where its underlying structure, where creators are only offered a small number of token transactions, with little incentive to stick around after the initial sale – to non-fixable tokens. NFTs themselves have a poor track record in this regard, and one of their main selling points – the ability for creators to earn ongoing royalties long after the initial sale – is largely unrealized, and in some cases cut or blocked altogether. Overall, NFT sales early this month fell more than 95% from the industry’s January 2022 peak to $288 million, per CryptoSlam data.

The idea of tokenizing famous crypto-personalities and buying users from their shares is also not new. An Andreessen Horowitz and Sequoia-backed platform known as BitClout attempted a similar attempt in 2021, quickly raising nearly $170 million worth of Bitcoin from investors and users after pre-reserving thousands of accounts for influencers. It soon faced a legal backlash after one of those influencers disputed BitClout’s use of data without permission, and the company was later rebranded.

Ultimately, friend.tech’s main problem goes to the heart of crypto’s biggest problem: to provide a utility that encourages users to go beyond speculation. Others are already developing tools on top of friend.tech to help this financial system play: tips on how to pick the next biggest uptrend, Trader Leaderboard and ticker price charts.

“As it stands, you’re basically looking at an unintentional first-in/first-out Ponzi because there’s no depth of product features to create stickiness or persistence,” said Ryan Wyatt, former president of Polygon Labs. with X.

“There are undoubtedly interesting social [and] crypto loops here to explore,” he added. “But let’s face it, we know how these things work without a sticky product of real value.”

If the platform can’t find a way to encourage non-crypto-natives to benefit from the service, it will likely go the same way as everything else in the industry when a newer, shinier novelty comes along – into the ether.