A @Friend.tech social layer dapp, launched in beta on August 11th, quickly went viral, gaining hundreds of thousands of users in a matter of days. It surpassed Uniswap and Bitcoin in fees generated several days in a row, as well as Ethereum in daily transactions count. But there are some caveats: a lot of volume reportedly comes from bots and spammers, the smart contract looks like a sort of price-pumping machine (remember, what goes up exponentially goes down exponentially), and intuitively, it may feel like a dystopian form of over-financialization of everything. Is all the FUD surrounding this project justified, and how does this fit with the seed investment from Paradigm, “maestros of mechanism design” (so to speak)?
@Friend.tech is a platform that allows you to tokenize your online identity, essentially turning it into a marketable asset. And so far, it’s a roaring success, demonstrating the potential of turning decentralized social layer applications (dapps) into revenue-generating mechanisms.
To be precise, Friend.tech allows users to tokenize social connections on TwiXter by buying and selling sort of “shares” in public profiles. By purchasing some other’s “share” (now they reasonably prefer to call it “keys”), one can gain access to a private chat room with their “portfolio” of friens in crypto TwiXter, with the platform charging a 5% transaction fee and other 5% representing the owner’s profit.
(Thread)
Isn’t it sound great? So, what’s the problem?
Well, from a philosophical perspective, one could raise concerns that Web3 tools are being used to hyper-commodify human personhood and identity, as evidenced by Friend.tech and Worldcoin cases. But I don’t feel like that kind of reasoning can have any real impact on the crypto market, so let’s better take a look at the Friend.tech’s economic sustainability.
Friend.tech effectively combines the traditional Web2 social media status games with the hyper-financialization trends of Web3. This is achieved through a ‘boding curve’ smart contract technology, which essentially creates a synthetic market where tokens can be traded against a specific curve, such as a (dampened) quadratic curve.
This means that users can buy and sell tokens in a mathematically mediated market at any time without waiting for a counterparty to fill the trade. Here’s a thread with Friend.tech’s smart contract explained:
(Thread)
The key point about exponential bonding curves is that they are… exponential. It’s like the pump is built in from day one by design. However, exponential growth is inherently unsustainable. It’s important to remember that what grows exponentially can fall just as quickly. So, the real test of Friend.tech’s sustainability will come after the initial hype subsides. For now, Friend.tech needs a massive inflow of new buyers to maintain prices and position itself as the next crypto’s “killer app.”
Of course, one could say circumstances can change. And with the support of @Paradigm’s experts, the app could undergo significant changes. But actually, the smart contract itself is non-upgradable, so the only thing developers can change in it is the fee size for the platform and users and the protocol fee destination.
There are also a lot of privacy and security concerns surrounding the project, which, in fact, may have some ground…
…But does seem a bit overblown at times. All the FUD about Friend.tech stealing your google/apple/phone info seems to come from using @privy_io for authentication (thread):
Among the other findings published by @cygaar, there is no visible bot protection on their backend at the moment, which is already having a very noticeable impact.
But what’s more interesting is the on-chain logic of the dapp: it creates a custodial wallet for every user, the keys from which live on the Friend.tech servers, so if their backend were to be hacked, you could potentially lose these funds.
(Thread)
To summarize, the overall hype around Friend.tech looks like a prime example of “degens gonna degen.” And if it’s relatively harmless for now, let them just have fun (because one can not stop it anyway).
