The
cryptocurrency market has once again witnessed a sudden success and an even
faster downfall, with Friend.tech being the leading player. Within two weeks,
it became one of the highest-earning services in the decentralized finance
sector while simultaneously stirring up controversy with its business model and
alleged use of bots for speculation.
This
article delves into the rise and fall of Friend.tech, examining the factors
that contributed to its initial success and subsequent decline and its
implications for the broader crypto ecosystem.
Friend.tech,
a blockchain -based platform that debuted on 10 August, experienced a rapid
ascent in the crypto world. The platform allows users to buy and sell digital
tokens linked to influencers on X (formerly Twitter), providing a unique way to
engage with Internet personalities like Cobie, HsakaTrades, and professional athletes,
including Milwaukee Bucks player Grayson Allen. Within less than two weeks of
its launch, the platform’s fees skyrocketed to nearly $1.7 million, making it
the highest-earning service provider in decentralized finance at one point.
However,
the platform’s success was short-lived. Fees dropped by nearly 70% within days,
and the number of new users plummeted from 20,360 to just 4,484, a decline of
almost 80%. In the meantime, the revenue fell tenfold, from record-high
$840,000 reported on 21 August to $81,000 reported yesterday (Sunday).
The exact
reasons for the decline are still unclear, but Messari’s (a crypto research firm) report cited high trading fees, slow load times, and a steep pricing curve as
potential factors.
Friend.tech
operates on Coinbase’s new blockchain network, Base, and its initial success
was a rare bright spot for the chain. However, the platform has been plagued by
various issues, including a lack of a privacy policy and the role of automated
trading bots in manipulating transactions. These bots have significantly
contributed to the platform’s downturn, as they can buy tokens before influencers,
forcing them to purchase at higher prices.
— Brian Armstrong 🛡️ (@brian_armstrong) August 22, 2023
The
platform has also faced criticism for its token model, which provides little
incentive for creators to remain engaged after the initial sale. This has led
some to liken Friend.tech’s model to that of nonfungible tokens (NFTs), which
have similarly struggled to provide ongoing value to creators. If Friend.tech
fails to offer a compelling utility that encourages user retention, it risks
becoming another fleeting trend in the volatile crypto landscape.
Moreover,
the platform recently renamed its influencer tokens from ‘shares’ to ‘keys’
likely in an attempt to sidestep potential regulatory issues. This move came
after legal experts noted the possible overlap with the US regulators’ ongoing
crackdown on digital assets that could be classified as securities.
We’ve renamed Shares to 𝗞𝗲𝘆𝘀. The original name was a placeholder during development and we think Keys better illustrates their purpose as in-app items used to unlock your friends’ chatrooms pic.twitter.com/phkZky13VL
— friend.tech (@friendtech) August 21, 2023
Crypto’s Utility Problem
Friend.tech’s
challenges are symptomatic of a larger issue in the crypto space: the struggle
to provide a real utility that encourages user retention. The platform’s rapid
rise and fall serve as a cautionary tale, highlighting the volatile nature of
crypto projects that lack a sustainable model.
As Ryan
Wyatt, the former president of Polygon Labs, aptly put it, “In its current
form, you’re basically looking at an unintended Ponzi with first in/first out
because there isn’t any product feature depth to create stickiness or
retention.”
And in it’s current form you’re basically looking at an unintended ponzi w/ first in/first out because there isn’t any product feature depth to create stickiness or retention, so creators will churn quickly, users will be left exiting creators, etc.
A lot of work to be done.
— Ryan Wyatt (@Fwiz) August 21, 2023
The cryptocurrency market, in its decade-plus history, has witnessed many high-profile successes and even more high-profile failures. Recent examples include the collapse of the FTX exchange in November 2022 and the Terra ecosystem and its Luna coin in March 2022.
Due to the volatile nature of cryptocurrencies and the costly crimes occurring in this market, regulators in the United States have started to scrutinize the activities of crypto companies more closely. This has led to legal action against the two largest cryptocurrency exchanges in the world, Binance and Coinbase.
The
cryptocurrency market has once again witnessed a sudden success and an even
faster downfall, with Friend.tech being the leading player. Within two weeks,
it became one of the highest-earning services in the decentralized finance
sector while simultaneously stirring up controversy with its business model and
alleged use of bots for speculation.
This
article delves into the rise and fall of Friend.tech, examining the factors
that contributed to its initial success and subsequent decline and its
implications for the broader crypto ecosystem.
Friend.tech,
a blockchain -based platform that debuted on 10 August, experienced a rapid
ascent in the crypto world. The platform allows users to buy and sell digital
tokens linked to influencers on X (formerly Twitter), providing a unique way to
engage with Internet personalities like Cobie, HsakaTrades, and professional athletes,
including Milwaukee Bucks player Grayson Allen. Within less than two weeks of
its launch, the platform’s fees skyrocketed to nearly $1.7 million, making it
the highest-earning service provider in decentralized finance at one point.
However,
the platform’s success was short-lived. Fees dropped by nearly 70% within days,
and the number of new users plummeted from 20,360 to just 4,484, a decline of
almost 80%. In the meantime, the revenue fell tenfold, from record-high
$840,000 reported on 21 August to $81,000 reported yesterday (Sunday).
The exact
reasons for the decline are still unclear, but Messari’s (a crypto research firm) report cited high trading fees, slow load times, and a steep pricing curve as
potential factors.
Friend.tech
operates on Coinbase’s new blockchain network, Base, and its initial success
was a rare bright spot for the chain. However, the platform has been plagued by
various issues, including a lack of a privacy policy and the role of automated
trading bots in manipulating transactions. These bots have significantly
contributed to the platform’s downturn, as they can buy tokens before influencers,
forcing them to purchase at higher prices.
— Brian Armstrong 🛡️ (@brian_armstrong) August 22, 2023
The
platform has also faced criticism for its token model, which provides little
incentive for creators to remain engaged after the initial sale. This has led
some to liken Friend.tech’s model to that of nonfungible tokens (NFTs), which
have similarly struggled to provide ongoing value to creators. If Friend.tech
fails to offer a compelling utility that encourages user retention, it risks
becoming another fleeting trend in the volatile crypto landscape.
Moreover,
the platform recently renamed its influencer tokens from ‘shares’ to ‘keys’
likely in an attempt to sidestep potential regulatory issues. This move came
after legal experts noted the possible overlap with the US regulators’ ongoing
crackdown on digital assets that could be classified as securities.
We’ve renamed Shares to 𝗞𝗲𝘆𝘀. The original name was a placeholder during development and we think Keys better illustrates their purpose as in-app items used to unlock your friends’ chatrooms pic.twitter.com/phkZky13VL
— friend.tech (@friendtech) August 21, 2023
Crypto’s Utility Problem
Friend.tech’s
challenges are symptomatic of a larger issue in the crypto space: the struggle
to provide a real utility that encourages user retention. The platform’s rapid
rise and fall serve as a cautionary tale, highlighting the volatile nature of
crypto projects that lack a sustainable model.
As Ryan
Wyatt, the former president of Polygon Labs, aptly put it, “In its current
form, you’re basically looking at an unintended Ponzi with first in/first out
because there isn’t any product feature depth to create stickiness or
retention.”
And in it’s current form you’re basically looking at an unintended ponzi w/ first in/first out because there isn’t any product feature depth to create stickiness or retention, so creators will churn quickly, users will be left exiting creators, etc.
A lot of work to be done.
— Ryan Wyatt (@Fwiz) August 21, 2023
The cryptocurrency market, in its decade-plus history, has witnessed many high-profile successes and even more high-profile failures. Recent examples include the collapse of the FTX exchange in November 2022 and the Terra ecosystem and its Luna coin in March 2022.
Due to the volatile nature of cryptocurrencies and the costly crimes occurring in this market, regulators in the United States have started to scrutinize the activities of crypto companies more closely. This has led to legal action against the two largest cryptocurrency exchanges in the world, Binance and Coinbase.
