What If You Can Buy/Sell Shares of Your Friends’ Social Media Profiles? (ft. Friend.tech)
Let’s say everyone could issue 100 shares of themselves. In that hypothetical scenario, whose shares would you buy, hoping the value would increase? How many shares would you buy, and until when would you hold those shares?
In my first year at 500 Global, one of our partners asked me, “Among all your friends, if you could invest an angel check today, who would it be and why?”. Since this question was set in a founder investing context, I remember replying by saying the names of a couple of innately curious friends, constantly experimenting with side projects and those who’ve expressed their eagerness to build something their own one day.
But what if we apply that same question from the founder and VC context to a more social context? What if you could buy the “shares” of a friend with excellent upside potential in hopes that your friend’s future popularity will bring the value of your shares up? And remember, we are not talking about shares of a friend’s business entity but of herself. It’s like if your friend went public one day and got listed on the NASDAQ, and from that IPO day, you could buy and sell her shares.
This is the one-liner of how Friend.tech is described.
But I might be painting a rosy picture in your mind with this ideal “investing in your friend scenario” because the truth is, this decentralized social media that is taking the crypto world by storm seems more like a Patreon x OF (without the r-rated part, at least for now because no images are allowed) meets crypto’s gambling frenzy.
Let’s take a deep dive into Friend.tech, to understand what everyone in Crypto Twitter is talking about: 👇🏻
Main things you need to know about this new social app
- Friend.tech is a (Social + Finance = SocialFi) platform that allows users to tokenize their friends, which means you can buy and sell shares of your friend’s social media profiles. But, here, ‘friends’ could be your actual friends from the real world and influencers or celebrities you follow in X. Once you own the share(s) of someone, you can send private messages to that person and access that person’s channel.
2. The protocol charges a 5% fee on every trade transaction, and since its beta launch on August 11, it has amassed over $2.8 million in protocol fees. And according to the ranking of fees and revenue data pulled in from DeFi Llama, over the last 24 hours, Friend Tech has generated more protocol fees than established players in the ecosystem like Bitcoin network, Uniswap, MakerDAO, and Binance Smart Chain (BSC).
3. Friend.tech’s trading volume is 9x higher than the ENTIRE Ethereum NFT market. Also, it has 1.4x as many buyers, with currently ~82.K unique buyers.
4. Paradigm, considered a blue chip VC in the crypto space, invested in their Series A round at a $50 million valuation. This equity round came with token warrants, hinting that tokens might be revealed.
(*Note: token warrant is a derivative that allows the warrant holder to purchase tokens issued by the company at a specified price. Investment rounds with token warrants do not guarantee a future token, and the team still has the option to release or not.)
5. The dApp was built on Coinbase-funded Ethereum Layer-2, Base. (I also wrote a deep-dive analysis on Base)
6. Friend.tech announced on August 14 their rewards points program, which will be airdropped to early users of the project. A total of 100,000,000 points will be distributed over six months every Friday. However, the exact utility is still unknown. Some people have been speculating that these points will be saleable as tokens later:
Based on the math above, if someone has accumulated 1.1 million points, this could be translated as ~$660,000. (FYI, this is the amount of points the aforementioned influencer, Cobie, has accumulated so far.)
How are people “making” money?
Friend.tech is currently designed as a 50/50 transaction fee split on trading volume for the shares — 5% to the platform and 5% to the creator. Because of this design, content creators need to create more exclusive, highly engaging content to boost the chance that consumers of their content will want to continue “betting” on the access value by keeping the share they own. This value to access also pushes the demand in the secondary market, creating a second-order effect.
However, the irony lies here. If a content creator is creating great content, then their original shareholders would not be selling their shares, so the 5% split in transactions wouldn’t be an incentive anymore if the number of shares is capped. Hence, some suggest that Friend.tech should also incentivize on a shareholder base rather than transaction fees from trades only.
Any criticism/concerns about this new decentralized social app?
- Ponzinomics? The math shown below shows that the current fee + bonding curve model encourages people to ‘hodl’ (or the act of not selling) until “fomo-ing fools” join and buy the shares they own at sub-par premiums. The newer buyers are coming in as exit liquidity to those who got there early = ponzi.
- There is little information on the project on the sparse site, with no information about the roadmap, founders or any whitepaper — all things most reputable projects would want to have on launch.
- The call-to-action that prompts users to read its privacy policy tells users that it’s “coming soon!”. This is why people advise not to use their primary emails to register and fund a fresh wallet with no transaction record (funded from a centralized exchange) to connect to the app.
- Revenues come only from trading fees but not from having more shareholders, so people will be incentivized for their shares to be constantly traded rather than growing a loyal shareholder base.
- There are still debates about whether the fee split for creators should be higher or lower.
- The UX is still crypto-native (i.e. needing to bridge ETH to Base) while the upside of this platform lies in non-crypto influencers and celebrities joining, but all the steps required to set up an account might not be as straightforward.
- The dApp can stay connected to your Twitter account until you revoke it. This is part of the mandatory permissions when you register.
How do influencers use or intend to use their open channels with their buyers?
- QnA or Ask-Me-Anything (AMA) sessions
- Exclusive content (i.e. sharing insights before making them public on Twitter)
- (Some more creative) Raffling trading fees to one of their shareholders
- Currently, images can’t be sent to the channels, but once this feature is added, people are expecting (or hoping) content creators from OF to migrate over
The information provided in this article is for general informational purposes only and should not be considered financial, investment, or professional advice. The author of this article is not affiliated with Friend.tech or any other companies mentioned in the content. Readers are strongly encouraged to conduct their research and consult with a qualified financial advisor before making any investment decisions.
If you have any further questions or opinions about this piece, please feel free to reach out via Twitter @minchi_p.
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Other resources:
If you want to understand the tokenomics of this platform in-depth, please check out this Twitter thread written by my friend Calvin who is the Co-founder of Impossible Finance:
This tweet expresses all the concerns of this social app:
