Decentralized social media continues its development, and the recent launch of Friend.tech DApp has marked yet another milestone.

Released in beta on August 10, the platform allows users to tokenize and sell their connections, so that people who buy the “keys” to their private chatrooms can send them direct messages.

The DApp gained significant attention after August 18, when it became known that earlier this year, Friend.tech secured a seed round from Paradigm, a famous crypto VC. Subsequently, Paradigm closed a Series A round, bringing the platform’s valuation to $50 million.

Friend.tech quickly went viral on X (formerly Twitter), attracting an impressive 140’000 users at the time of writing (source: Dune Analytics). This includes an NBA player, celebrity gamers, crypto influencers, and other people with engaged audiences.

The platform has also generated an astronomical amount of fees: an equivalent of $5.3 million in the past week alone, which positioned it in 5th place among all web3 DApps (source: DeFiLlama). At one point, it even ranked 2nd in 24h fees, trailing only Ethereum.

With the excitement building, it’s time to delve into Friend.tech mechanism and controversies, trying to discern whether it could sustain public enthusiasm beyond a few weeks.

What is Friend.tech?

Built on Base, the newly launched Ethereum layer-2 developed by Coinbase, Friend.tech is a decentralized “social finance” network that leverages users’ connections.

Its essential functions are not much different from Telegram groups, but the process of joining and leaving the groups is monetized. A user can download the DApp on mobile, log in with their X account, fund their Base wallet with $ETH, and buy a “key” to a specific influencer’s private chat room. This key can be sold afterward if a user wishes to exit the group.

As the number of people within a group increases, so does the key’s price, encouraging smaller groups. The selling price for a key starts at 0 and then mirrors the preceding buying price (i.e. when the group was one person smaller than the actual size). This is aimed at discouraging short-term speculation. The platform charges 10% per transaction, with 5% going to the room owner and the remaining 5% - to the Friend.tech treasury.

To stimulate adoption, Friend.tech has committed to distributing 100 million “points” to the early users over the next 6 months. These points are expected to eventually transform into tokens, but due to the absence of on-chain records, the rules remain unclear.

Controversies and potential

In its brief, yet eventful history, the crypto space has witnessed a lot of hype and a lot of disappointment. This (especially) concerns the projects with heavy VC backing and support from the industry’s influencers.

Friend.tech is visibly well-connected, with numerous crypto players spreading the word. The choice of Base as the blockchain is likely to be deliberate too, and the praise from Coinbase’s senior software engineer may be the smallest visible demonstration of the possible synergies with the industry heavyweight.

Nonetheless, questions have arisen about the project's fundamentals, beginning with its founders.

Friend.tech was built by Racer and Shrimp, the pseudonymous web3 developers. The former is known to be the chief developer of TweetDAO and Stealcam (which he founded with Shrimp), two failed decentralized social media experiments.

While these failures aren't inherently damning, they both exhibited characteristics reminiscent of Ponzi schemes. Indeed, both DApps’ monetary systems were overly reliant on the most recent user, rendering their sustainability questionable and leading to their deactivation.

In Friend.tech, the revenue comes from transactions and not simply the arrival of a new user. This model appears more sound from a business perspective, but it still encourages chat room owners to promote keyholder turnover in various ways. Some analysts find it precarious in the long run, cautious notably of artificial FUD.

Among other issues the platform grapples with technical capacities (founders admit not being ready for such a rapid success), privacy concerns (privacy policy still undisclosed), and a user experience that needs to be worked on. Unlike Discord, which can also support token-gated private chats, Friend.tech appears rather simplistic.

Ultimately, it will be the growing support from crypto industry influencers and users, along with potential backing from non-crypto sectors, that will determine the viability of Friend.tech’s business model. In the meantime, the project remains controversial. As it often happens in the crypto space, the bigger the initial hype, the bigger the subsequent disappointment.

Written by D.Center