Friend.Tech — a new era for social networks or a one-day wonder?

In recent weeks, talk around the new Web3-platform Friend.Tech has not subsided. At first glance, the core features resemble Telegram groups or China’s WeChat. Yet its distinctive feature is the organic process of entering and exiting group chats, as well as the ability to trade users’ ‘shares’.

Friend.Tech launched on August 10 on the Ethereum second layer Base, supported by Coinbase. This is a decentralized social-network platform integrated with X (formerly Twitter), which allows tokenizing participants’ profiles.

Senior Coinbase software engineer Yuga Coler said that the startup’s creator is a ‘crypto veteran’ under the alias Racer. Previously he worked on TweetDAO and Stealcam.

According to the dashboard Dune, at the time of writing the protocol’s daily fee volume exceeded $3 million, and the total number of transactions stood at 1.6 million. By DeFi Llama, DeFi Llama reports the amount of funds locked in Friend.Tech reached $7.26 million and continues to grow.

How the app works

Friend.Tech has created a marketplace for investments in specific people, whether content creators or celebrities. Thus, anyone can buy or sell so-called ‘shares’.

In exchange, the user obtains a number of privileges, the main one being access to the group chat. There, holders can ask a question in private messages to the person in whose profile they’ve invested. The page owner answers only in the public channel.

Buyers and sellers of ‘shares’ receive a small percentage from each transaction. The asset’s price is assessed by the API yield curve — i.e., the more securities bought and in circulation, the higher their price, and vice versa.

Members can sell their ‘shares’ at any time and leave the chat.

Friend.Tech is still in an early stage of rollout, so developers promise to add more features.

To register for the app, an invitation is required, which may be sent by a friend or another user. After downloading the app, which is currently available only for iOS, the X account is linked.

To fully use the platform you need to make a minimum deposit of 0.01 ETH (~$18).

Co-founders include FaZe Clan co-founder Richard Bengtson, YC startup-accelerator CEO Harry Tan, and NBA player Grayson Allen. Also in the network are well-known crypto traders Cobie and Hsaka, whose ‘shares’ trade above $5,000.

Risks, drawbacks and community reaction

Despite the concept of a social network combined with earnings, Friend.Tech has several noticeable drawbacks.

Firstly, the app is not installed directly from the App Store and probably does not meet marketplace requirements due to its function of trading ‘shares’.

It is not known where user data is stored, including wallet keys. This has already come to light — previously with Friend.Tech leaked information about more than 100,000 X users. Experts say the vulnerability lay in the protocol’s API.

‘Shares’ on the platform are highly volatile, and their price depends on the creator and his actions — if the user abandons the app, the token price may collapse.

The functionality of the project opens many opportunities for fraud. For example, attackers could run a Pump & Dump scheme by creating a fake celebrity account.

Questions are raised by the enormous commissions in the app. Given the high frequency of transactions on the protocol, this could become a major drawback for users.

Friend.Tech may also face regulatory issues. Recently the developers renamed the ‘shares’ to ‘keys’, presumably to avoid attention from the U.S. Securities and Exchange Commission for longer.

Orlando Kosme, a lawyer with OC Advisory, told Decrypt that the project raises “alarm bells” as it aligns with the Howey test definition of a security.

Some members of the crypto community also criticized Friend.Tech. A user under the alias Yazan stated that the app has six to eight weeks before prices of shares and overall activity begin to fall sharply.

Among the project’s drawbacks he highlighted ‘ridiculous’ pricing, a non-working group chat and possible fraud.

“I think the platform will crash, as it happened with BitClout. We are in a bear market, and there’s nothing you can do about it. Everyone is grabbing at the chance to earn, but the project will crumble in the coming weeks or months,” wrote Legendary, the marketer.

In July, Bluesky — the decentralized alternative to X, backed by co-founder and former CEO of the social network Jack Dorsey — closed an $8 million seed round of financing.