Sebastian Sinclair

Less than a month after its launch, Web3 social app Friend.Tech has stumbled.



Activity on the network, whose dapp allows users to speculate on and gain access to individuals and their personal brands, topped out at around 38,000 transactions last week.



That figure has since fallen 96% to just 1,663 as of 5:00 am ET, according to a <a href="https://dune.com/cryptokoryo/friendtech">Dune Analytics</a> dashboard. At the same time, protocol inflow to the app has also dropped more than 90%, from $1.9 million witnessed on August 20 to $89,000.



Built on Coinbase incubated <a href="https://blockworks.co/tag/optimism">optimistic rollup</a>, Base, Friend.Tech tokenizes users’ social profiles, creating a gated chat room accessible through “keys” (initially known as “shares”) and allowing holders to engage with influencers and creators.



After signup each linked X account, formerly Twitter, gets keys purchasable on a bonding curve, so early holders gain entry to a particular chat space cheaply, while subsequent keys are progressively more expensive. Each time a profile’s keys are purchased, that user receives a fee.



The communication flow is asymmetric, meaning users can directly message an influencer, but their responses are broadcast to all keyholders.



The app’s potential over the last three weeks has attracted a range of industry participants, including traders and social media personalities. Some experts said the app <a href="https://blockworks.co/news/friend-tech-financialization-goldentre">could potentially provide a trading edge</a> by gaining knowledge within private chat rooms to accrue alpha, <a href="https://blockworks.co/news/friend-tech-bullish-bearish">while others have remained skeptical</a>.



Despite <a href="https://blockworks.co/news/friendtech-social-token">initial interest following its launch</a> on August 10, on-chain activity shows almost all traders have <a href="https://dune.com/queries/2845442/4754698">sold more shares than they have bought</a>, indicating a preference for liquidating positions, data shows.



The drop in activity calls into question the longevity of the platform and its ability to generate revenue. Friend.Tech, which was once pulling in $1.68 million in fees per day, has seen revenue fall to a little over $161,000, on-chain data from <a href="https://defillama.com/fees/friend.tech">DeFi Llama</a> shows.



That decline in fees translates into a roughly 99% hit to daily revenue, from around $840,000 to just over $80,000, data shows.



A peak of active buyers, which topped out at 3,315 compared to 1,423 active sellers, on August 21, has also dropped to just 361 and 262, respectively. USD volume of keys bought, meanwhile, has sunk to $38,000 per day, from an initial peak of $1 million.



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Friend.Tech momentum stalls

Nick Almond

Crypto Twitter was in need of something new. The recent waves of hyper-degenerate memecoins and <a href="https://blockworks.co/news/hamsters-gambling-binance">hamster-racing-fuelled GambleFi</a> ended in a storm of painful rug pulls. But fear not, there’s a new crypto craze in town: Friend.tech.



Friend.tech is a platform to tokenize yourself, or perhaps more accurately, marketize your online identity.



And so far, it’s a roaring success.&nbsp;



Friend.tech reveals the extreme potential of social layer decentralized apps (dapps) to become mechanism-powered money printers, with roughly <a href="https://dune.com/msilb7/friendtech-on-base-activity">$7 million in fees generated in its first week</a>, half of which got distributed to creators on the platform. 



Sounds great. So, what’s the problem?&nbsp;



One could wax philosophical here and draw concern over the trend of Web3 tools being used to hyper-commodify human personhood and identity, as seen now here and before with <a href="https://blockworks.co/news/worldcoin-privacy-concerns">Worldcoin</a>. One could argue that these dapps are reducing us to the incentive chasing hamsters at which we’ve been throwing our magic internet money. 



But I actually don’t think we’ll need to worry about any of that.&nbsp;



The real problems are with Friend.tech’s economic sustainability. The application is based on an exponential bonding curve which is, well&#8230; exponential. 



<h2 class="wp-block-heading">Bonding curves and digital status games</h2>



Friend.tech effectively bridges the worlds of the old-school Web2 social media esteem games with the hyper-marketization-of-everything Web3 dynamic.



It achieves this through a “bonding curve” — a bit of smart contract wizardry first proposed by <a href="https://medium.com/@simondlr/a-bonded-curation-community-247f14a6de04">Simon de la Rouviere</a>. This allows a smart contract to generate a kind of synthetic market, where tokens can be bought and sold against a curve, in this case a (dampened) quadratic curve. 



Much like Uniswap, this means that you’re not waiting around for a counterparty to fill your trade: You can buy and sell tokens against a mathematically mediated market at any time.&nbsp;



With Friend.tech, what people are buying are “shares” of a personality on X, formerly Twitter, which have now been <a href="https://blockworks.co/news/friendtech-social-sec">hastily rebranded </a>to “keys” following regulatory fears of treading on the US Securities and Exchange Commission’s sacred ground. These keys allow you to gain access to a private chat room with your “portfolio” of crypto frens on X, where you can send them private direct messages and essentially run a group broadcast announcement channel. 



The idea taps into a long prophesied crypto vision of social tokens, whereby literally everyone can have a token. I myself have long thought the influencer + token combo was a path to “mainstream adoption.” And then, I put the idea back in the nightmarish dystopia box to worry about later.&nbsp;



But here we are now.



<h2 class="wp-block-heading">A conceptual fork</h2>



The idea of tokenizing your internet personality is not a new one; in fact, almost the exact same mechanism was launched two years ago with the ill-fated (and frankly terrible) Bitclout. The idea is so similar, right down to the bonding curve mathematics, that you might as well call this a conceptual fork of Bitclout.&nbsp;



So why is Friend.tech riding the hype wave, while Bitclout was almost universally panned? 



It all comes down to the execution.&nbsp;



Bitclout began with such a heinous invasion of digital identity that even Mark Zuckerberg would have winced. By preloading the app with Twitter&#8217;s top accounts and the promise of free Fugazi money, they managed to growth hack their way to being the talk of X. Bitclout also came with a bull market-tastic venture capital raise and public sale — they raised an obscene amount of money ($250 million), half of which is still in their Bitcoin <a href="https://blockchair.com/bitcoin/address/1PuXkbwqqwzEYo9SPGyAihAge3e9Lc71b">wallet</a>. 



Friend.tech didn’t do that. Instead, this iteration of tokenizing yourself was launched by one of X&#8217;s very own: 0xRacer, previously known for the short lived but brilliant little experiments such as TweetDAO.



Friend.tech has now led a rare app-centric hype wave, with the crypto community on X piling into their bonding curves and trading digital representations of each other. 



But I will reiterate here what you need to remember about exponential bonding curves — they are exponential. It’s like the pump is built in for day one. But nothing can pump forever, and the market is saturating quickly, pricing out almost everyone from creators&#8217; keys. It’s also worth remembering that exponential up also means exponential down, and the real test of Friend.tech’s longevity will be when this initial hype dies off. 



Of course, all of this could change. The app is backed by maestros of mechanism design Paradigm, so the game could well upgrade. As it stands though, Friend.tech will need massive inflows of new buyers to sustain its prices and put it in the running to be crypto&#8217;s next “killer app.”



If I was being difficult, I now could go on about Friend.tech’s questionable opsec implications and lackadaisical approach to <a href="https://x.com/nftnow/status/1693635196837347655?s=46&amp;t=h5fzhVN9u2Ubumo1ljWsfA">privacy</a>. I could flag the fact that our social apps of the future live in the adversarial cryptoeconomic world of blockchains and already, this app is an arbitrage bot <a href="https://x.com/arixoneth/status/1694039285970731080?s=46&amp;t=h5fzhVN9u2Ubumo1ljWsfA">playground</a>. I could moan about how we’ve reduced humans to market price data and hyper-financialized our souls. 



But honestly, I can’t help but feel a bit numb to it. We’re in a world with TikTok NPCs; nothing can surprise me now.&nbsp;



I despised Bitclout, but Friend.tech’s crypto-native origins here do make a huge difference. The fact that Worldcoin has so effectively re-priced grimy late-stage capitalist techno-atrocities makes this feel like a strong case of “degens gonna degen.” It’s mostly harmless, let them have fun. 



And that’s what it is, a bit of fun. Let’s not conflate Friend.tech with the broader social token use case set, which is vast and genuinely has the potential to unlock huge value in the creator economy (the OnlyFans crowd are already checking it out). Friend.tech, however, is a social speculation game, and at this point not much more — unless they could sort out that small bonding curve issue.



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<div class="wp-block-post-author-biography">Nick Almond (@DrNickA) is Founder and Architect of FactoryDAO, a next generation modular DAO creation protocol. </div>


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Friend.tech is mostly harmless — for now

Darren Kleine

Avi Felman recently joined Friend.tech, the controversial social media app that financializes public profiles with “keys” — <a href="https://blockworks.co/news/friend-tech-taxes">previously described as “shares”</a> — purchased to connect and invest in personalities.



“I get personally offended when people sell my shares,” he says.



On the 1000X podcast (<a href="https://open.spotify.com/episode/6Tr23HIsQS7b3Prq3D1CMg?si=62a9403eeca349cc">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038?i=1000625538426">Apple</a>), the head of digital asset trading at GoldenTree jokingly warns his audience: “If you sell my shares, I will see it and I&#8217;ll be upset about it and I will — I don&#8217;t think I can threaten people on this podcast — but I will be very upset with you.”



Cumberland’s global head of trading and podcast co-host Jonah Van Bourg is intrigued by the new app. “Let&#8217;s say that I am a novice, aspiring day trader,” he says. “I read crypto Twitter, I follow a few influencers. I could theoretically buy those influencers’ shares on Friend.tech and get invited into private conversations with those influencers.”



“I theoretically might be able to learn something about the market that could help me do a better job profiting from it trading,” he suggests.



<h2 class="wp-block-heading">Financialization of people is inevitable</h2>



Felman agrees on the app’s potential utility, adding that the <a href="https://blockworks.co/news/friendtech-social-sec">financialization of people</a> is inevitable, given the blockchain technology that currently exists. But Van Bourg questions why the app needs to involve crypto at all.



“It&#8217;s just the easiest way to transfer value on the internet,” replies Felman. “If you&#8217;re going to have value transfer on the internet, crypto&#8217;s the best way to do it.”



Felman says the app follows a tried and true formula — the assignment of monetary value to access. Whether it’s getting a table at a nightclub or sitting down for a lunch with Warren Buffett, access costs money, Felman argues. “I view this as a natural extension of that.”



The tech allows celebrities to engage more directly with fans, Felman says. “People are willing to pay for access to people that they idolize,” he says. He also likes the betting element of the app.&nbsp;



“You can resell that access,” he says. “Potentially, if you get access to somebody early on, you can make a lot of money by betting that this person is gonna be huge.”&nbsp;



Felman imagines betting on someone’s future success using the app. “I don&#8217;t know exactly how they&#8217;re going to be successful, but I know that this person is going to be successful — and I want a piece of that.”



<h2 class="wp-block-heading">A refreshing change from memecoins</h2>



Van Bourg mentions the success of the app in its early stages, noting it is currently the third-largest revenue generator in the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> network, following only the mainnet itself and ether (<a href="https://blockworks.co/price/eth">ETH</a>) staking service, Lido. He says the “proof in the pudding” is the fact that people are spending “real ETH” on the app.



Read more: <a href="https://blockworks.co/news/friendtech-social-token">Decentralized social media app Friend.tech is surging</a>



“Imagine instead of buying a concert ticket,” Felman says. “They just spin up an account for the concert and the first thousand people to buy shares are the only people that go to that concert.”



“There are so many random things that you can do with this, which is why I actually think that there&#8217;s a lot of money to be made here.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG9312094678" width="100%"></iframe>







Van Bourg notes that a few previous iterations of similar concepts have been created in crypto, only to have quickly fizzled out. “But that doesn&#8217;t mean that the technology itself isn&#8217;t perfectly conducive to this use case,” he says.



“It&#8217;s just refreshing to talk about <a href="https://blockworks.co/news/friend-tech-bullish-bearish">something other than Pepe</a> or Barack Obama Sonic Harry Potter coin. I&#8217;m just sick of that stuff.”



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Friend.tech: Flash in the pan or inevitable future of crypto financialization?

Casey Wagner

Friend.tech, the decentralized social media platform that surged over the weekend, could lead to some significant tax headaches this spring, accountants say.&nbsp;



At launch, the platform allows users to buy and sell “shares” of personal accounts on X, formerly Twitter. Friend.tech rebranded what users could buy to “keys” on Monday. Either way, under this economic model, users can generate revenue in a number of ways — and create taxable events, according to accountants who spoke to Blockworks. 



Profit may be earned by trading keys — plus, influencers take a 5% commission on trades of their own keys — and some key holders can earn “dividends” when influencers opt to share these earnings. 



“Friend.tech does likely have <a href="https://blockworks.co/tag/kyc">KYC</a> [know-your-customer] collection and reporting requirements under the Infrastructure Investments and Jobs Act of 2021,” said Gabriel Brin, vice president of tax and accounting product at Ledgible. “However, regardless of the protocol/app ability to fulfill those requirements, the investors have the same tax implications of buying and selling these social media digital assets that they would on trading any other digital assets on any other platform.” 



Anyone trading on the app should expect to report their activities and profits at the end of the tax year, Brin added.&nbsp;



“A user’s trade activity is not free of requirements for regular record keeping, tax return documentation and tax liability,” Brin said. 



Read more: <a href="https://blockworks.co/news/friendtech-social-sec">Friend.tech will likely draw the SEC’s attention, legal experts say</a>



According to Amy Hatch, tax SME manager at TaxBit, most Friend.tech transactions would fall under capital gains or ordinary income for the purpose of tax obligations. She says users should maintain records and use an aggregator that can organize financial data from different sources. 



“Become acquainted with the tax laws relevant to cryptocurrency transactions and earnings from digital platforms in your area,” Hatch said. “These rules can differ greatly by jurisdiction, so it&#8217;s essential to understand the local requirements you may be subject to.”&nbsp;



The platform links users wallets with their X handles, which is then visible to the public.&nbsp;



“It is feasible that blockchain analysis tools could be used by tax authorities (or any interested party) to identify patterns of transactions and link them to specific users,” Hatch said. “However, while on-chain data can assist in tracking transactions, determining the intent and related taxability behind these transactions often requires additional context and investigation.”



<a href="http://blockworks.co/tag/friend-tech">Friend.tech</a> does not yet have a privacy policy, but there are some terms of use. ​​At sign-up, users allow Friend.tech to view all posts and accounts that the user can see, including protected accounts. 



Users also grant permission for Friend.tech to post posts and reposts from the users’ account. Users can disable these permissions following registration.



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Using Friend.tech? Accountants advise keeping close records

Molly Jane Zuckerman

<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="256" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024&amp;h=1024" alt="" class="wp-image-60166" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/Off-Topic-with-Molly-Jane_20230616a-1.png?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



For the past two days, I have officially been on sale.



Because as part of my shtick where I try out weird crypto projects so that you don’t have to, I’ve registered myself on crypto’s new “killer app” — Friend.tech.



Granted, the act of linking my X account and sending a minimal amount of ETH to a new app is a lot less invasive and weird than getting my <a href="https://blockworks.co/news/worldcoin-eyeballs-scan-brooklyn">eyeballs scanned</a>. But it is at least potentially just as much of a privacy issue: If you <a href="https://twitter.com/caseywagnerr/status/1693622502755381471">click</a> on Friend.tech’s privacy policy, it simply declares: “Coming soon!”



Up until now, crypto apps — of which there are thousands —&nbsp;have only appealed to the very native audience. There are already decentralized versions of the App Store, Spotify, Google Maps out there, but no one besides crypto diehards can be bothered to go through the complex processes it takes to use them.&nbsp;



Which is why I’ve chosen to give space in my non-crypto, crypto column to look at what is being proffered this time…and to tell you why I don’t think that buying and selling online versions of people is going to be the app that finally succeeds in bridging that chasm from crypto to the rest of the world.&nbsp;



At least, I hope it’s not.



<h2 class="wp-block-heading">More than a just bad idea</h2>



A career in crypto can distort the reality around you. It’s a bit like living in an echo chamber; if you stay inside too long, you’ll start to believe that everyone else out there also firmly believes in a decentralized future, a utopia where we own our own data and dance on the graves of third-party custodians.&nbsp;



Working in crypto’s mutual admiration society — this is the only non-offensive term that Google gave me for “echo chamber” — also means that it’s easy to forget that not everyone is as strong of a believer in capitalism. I’m not saying that the world is secretly overrun by communists, but it’s fair to say that people working non-crypto jobs and living non-crypto lives might not spend as much time thinking about how to gamify and financialize everything.



And the appeal of Friend.tech —&nbsp;which allows you to not only put bits of yourself up for sale, but to also buy and sell pieces of your friends —&nbsp;inherently relies on the notion that people are eager and willing to commodify themselves.&nbsp;



The assumptions continue: that normal people, out there in the world beyond crypto, will be totally comfortable with putting a price tag on their online presence. That celebrities, influencers and content creators will want direct messaging access from any fan that can afford a piece of them.&nbsp;



Haven’t we learned how bad it is yet to assign monetary value to humans?&nbsp;



The highs and the lows that I’ve felt whenever anyone has bought or sold a piece of me — three people, now four, now I’m worth almost a dollar instead of a mere 40 cents — mark the start of a slippery slope. An app like Friend.tech opens possibilities for the worst parts of human nature to come out.&nbsp;



Plus, the ethics of being able to sell yourself online are incredibly hazy. If a journalist gets on Friend.tech, will angry readers buy and then dump their “keys” if the journalist writes an article they don’t like? What if a potential op-ed contributor buys shares of Molly Jane Zuckerman in an attempt to get a byline?&nbsp;



Friend.tech is still just a niche app with a predominantly crypto audience. You don’t yet have to worry about your non-crypto friends signing up and badgering you to buy “keys” of themselves to raise their value (notice that they are no longer called “shares,” which could <a href="https://blockworks.co/news/friendtech-social-sec" target="_blank" rel="noreferrer noopener">attract unwanted SEC attention</a>). And there is no shorting feature, so no “key” holders have any incentive to start putting each other on blast just yet.



But you should probably keep an eye on your crypto friends, because I already know one person who chose to buy a “key” of one of his crypto heroes instead of groceries.



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I don’t care much about tech, I don’t care a whole lot about finance, either. I care about writing stories and watching weird things unfold. And that’s why I’ve ended up in crypto. But because I’m missing that passion for what crypto and blockchain are all about — finance, tech, privacy, yadda yadda — I’m going to write instead about what I am actually interested in. Everything about crypto that has very little to do with crypto. That’s what this column will be about. All the tangential stories that come out of the blockchain and crypto space, what I think about them, and how I navigate it all as a skeptical former Russian literature major. It’s precisely my perch as an outsider that lets me do what I do: Opine on all sides of any crypto issue, no strings attached, no skin in the game. If you want to talk crypto with me, let’s go off topic.

Selling shares in yourself is so hot right now

Santiago Santos says he was lucky to pick up an invite-only Friend.tech code to join in the latest crypto social media craze. But after starting up the app on his mobile device, a request to connect his X account stopped him from going any further.



“There&#8217;s no fucking way that I&#8217;m gonna connect my Twitter to this thing,” he says.



Speaking to Blockworks on the Empire podcast (<a href="https://open.spotify.com/episode/1ytfr3DTPdr459Y6IVDTvq">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/friend-tech-debate-innovation-or-implosion-ansem/id1554930038?i=1000625250488">Apple</a>), crypto trader and X influencer Ansem is quite a bit more adventurous. Diving into the new social app earlier than most, he now ranks highly amongst popular profiles on the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> <a href="https://blockworks.co/news/coinbase-base-success-rea">layer-2 Base</a>-deployed app.



Ansem explains the basic premise of Friend.tech. After signing up, users buy their own share for roughly a dollar. “Once you buy your token, it&#8217;s available for trading and then everybody else on the app can trade — buy and sell — your token.”



Ansem suggests that a Friend.tech user might invest in a founder, musician, artist or athlete that hasn’t hit mainstream popularity yet. “Hold one of their shares and then as they grow and as they get more popular,” he explains, “their share price may go up.”



Owning a share also gives direct access to profiles, Ansem explains. “Say somebody&#8217;s an expert in some field of technology or in their industry and they want to share information through chat, then you buy their shares. You have access to that until you decide to sell.”



“People who are more active,” Ansem explains, “their share price is typically higher. People feel like they have that closer connection and closer access to them,” he says.&nbsp;



Unlike X, formerly Twitter, where the constant deluge of direct messages to profiles with huge follower counts can be overwhelming, Ansem says it’s much easier to filter through the more controlled information inflow.



Podcast host Jason Yanowitz expresses enthusiasm about the new app. “It&#8217;s cool to have a platform that allows you to bet both long and short on people in general.”&nbsp;



Ansem admits that the app is a little “bare-bones” at the moment, with no sort of public feed and an explore page that is “hard to filter through,” but he expects that the “core functionality” of the app will not change significantly.



<h2 class="wp-block-heading">Bullish on your friends?</h2>



Ansem then presents what he sees as the “bull case” for Friend.tech using the example of <a href="https://blockworks.co/news/music-nfts-use-cases">Taylor Swift</a>, whose concert tickets have resold for thousands of dollars. “If she were to have a Friend.tech group,” he says, “you would assume that there&#8217;s going to be people willing to pay whatever premium to get that direct access to her.”



“She can give access to her shareholders via private meetups or signings.”



People can also benefit from investing early in rising talents, Ansem explains. Users could pick out an up and coming college athlete, he says as an example, betting on the individual and — hopefully — watching them succeed. “That ability to bet on an individual early in their career, and then them blowing up, has never been possible before.”



But Ansem admits, Friend.tech is fraught with speculation. “If it goes up too fast, it&#8217;s going to come down.” Owners of multiple shares of the same profile are likely to take profits as share prices climb, he says. “There&#8217;s always going to be somebody who bought high and then the price goes down.”



“In the case where you have somebody famous and they do something publicly that&#8217;s not great — and then their share price goes down — people can lose money on that.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG2207478709" width="100%"></iframe>







The speculative nature of such an application has its benefits, Yanowitz says. It’s “amazing for customer acquisition costs,” he says, adding that Friend.tech <a href="https://blockworks.co/news/friendtech-social-token">now has over a 100,000 users</a>, acquired in just two weeks. “There&#8217;s no marketing plan that would&#8217;ve accomplished that,” he says.



Santos remains skeptical, concerned over possible security failures. “I’m not going to link my Twitter.”



“It opens up a vector where it could get compromised,” he says. “But I&#8217;m noodling on it. I may go on there.”



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Are you bullish or bearish on Friend.tech?

Friend.tech, a decentralized social media platform on which users can buy and sell “shares” of personal accounts on X, formerly Twitter, experienced a surge in interest over the weekend.



The platform raked in more than $1 million in fees over a 24-hour period —&nbsp;and attorneys focused on crypto believe it’s safe to say the US Securities and Exchange Commission is watching.



Friend.tech transactions come with two 5% fees. One goes to Friend.tech’s treasury and one goes to the account holder for whom the shares are being traded. Users can also, in theory, turn a profit by investing in accounts whose share value increases.&nbsp;



The model appears similar to the stock market, securities experts say. Just as public company shareholders can receive dividends, influencers can opt to share fees with buyers — a perk many are <a href="https://twitter.com/BitBoyJay/status/1693138621270819169?s=20">already offering</a> to boost trading volume and share prices.&nbsp;



Shareholders are granted permission to privately message accounts in which they have a stake. This gives the app a potential utility that could come in handy if securities regulators take interest, according to Mark Hiraide, a partner at Mitchell Silberberg &amp; Knupp.&nbsp;



But, the expectation of profit cannot be ignored, Hiraide told Blockworks.



“Clearly there&#8217;s some utility there, but the fact that they call these ‘shares’ is an indication that these are not just admission tickets,” Hiraide said. “What they are selling essentially is the prospect of capital appreciation in the shares; as more people join the platform, as more people buy shares to access popular personalities, the value of the shares will increase.”&nbsp;



Read more: <a href="https://blockworks.co/news/friendtech-social-token">Decentralized social media app Friend.tech is surging</a>



Whether or not the shares ever trade on a platform separate from Friend.tech will also be something to watch, Hiraide said, as listing on third-party exchanges would make it harder to distinguish the assets from traditional securities.&nbsp;



Users may not be innocent bystanders, either, as Jesse Hynes —&nbsp;attorney and founder of Seedstarter —&nbsp;said in response to whether influencers could be held liable for share price fluctuations.&nbsp;



“Honestly it’s a legitimate possibility,” he <a href="https://twitter.com/jesse_hynes/status/1693354937231577215?s=20">wrote</a> on X. “Even though a person who sets up an account is not an ‘issuer’ per se, if this is unregistered security offerings (like I suspect) people who willingly signed up to allow others to purchase shares may get caught up.”&nbsp;



The application does not currently have a privacy policy. Users are directed to “check out” the policy on the platform’s website, but are then told that it will be “coming soon.”&nbsp;



At sign-up, users allow Friend.tech to view all posts and accounts that the user can see, including protected accounts. Users also grant permission for Friend.tech to post posts and reposts from the users’ account. At this time, users can disable these permissions after registration.



The apparent popularity of Friend.tech and the attention it has drawn alone could be enough to make the SEC step in, Hiraide said.&nbsp;



“I think the same thing is true with the case against Ripple,” he said. “Even though the <a href="https://blockworks.co/tag/sec">SEC</a> knew that Ripple had a lot of resources and was going to be able to lawyer up, there was so much publicity surrounding <a href="https://blockworks.co/tag/ripple">Ripple</a> that the SEC had no choice but to pursue it.”



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Friend.tech will likely draw the SEC’s attention, legal experts say

Bessie Liu

Friend.tech has drawn the interest of over 100,000 users in less than a month of launching.



Users, who all seem to have something to say about it, are now parsing the possibilities of the fast-growing on-chain social app, which sells “shares” of social media profiles and employs social tokens.



In a sign of its popularity, the new on-chain social app has banked $1.42 million in fees in the past 24 hours, according to <a href="https://defillama.com/fees">DeFiLama</a>. This figure makes it the third-most profitable crypto platform, behind the liquid staking protocol Lido and the Ethereum blockchain itself.



Friend.tech launched on <a href="https://blockworks.co/news/coinbase-l2-base-mainnet">Base</a>, Coinbase’s layer-2 network, on Aug. 10. So far, Friend.tech has seen over <a href="https://dune.com/cryptokoryo/friendtech">1.3 million transactions</a>, earning over <a href="https://dune.com/cryptokoryo/friendtech">$2 billion </a>in revenue derived from fees.



More broadly, the platform builds on the concept of so-called social tokens.&nbsp;



Token-powered social media apps have existed for some time, with such tokens providing some kind of incentive or benefit to the holder, as is the case with fan tokens. Some of those platforms have <a href="https://blockworks.co/news/rally-leaves-social-token-nfts-in-limbo-after-abrupt-exit">struggled alongside other token projects</a>, however.&nbsp;



Friend.tech, however, stands out for its viral moment this weekend and the apparent speed at which it has attracted activity.&nbsp;



When a Friend.tech user signs up, they grant consent to the app to create shares on a <a href="https://basescan.org/address/0xcf205808ed36593aa40a44f10c7f7c2f67d4a4d4#code">smart contract</a> that is tied to their account on X, formerly known as Twitter. The project, according to its website, does not yet have a privacy policy.&nbsp;



Other users can purchase shares (or social tokens) of user profiles, enabling them to join group chats and message that particular user. Every time a person’s share is purchased, that user will receive a “subject fee.”



The product also enables participants to spot up-and-coming users by listing trending trades and sharing an activity feed for shares owned within a given network.&nbsp;



Currently, users can only sign up to Friend.tech with a referral code. Crypto influencers on X have jumped at the opportunity to share personal referral codes to earn “points,” which bring about airdrops every Friday.&nbsp;



As of Aug. 21, there were over 80,000 unique <a href="https://dune.com/cryptokoryo/friendtech">buyers</a> on Friend.tech, and over 30,000 unique <a href="https://dune.com/cryptokoryo/friendtech">sellers</a>, according to Dune Analytics data.&nbsp;



However, it is unclear how many of those users are trading bots.&nbsp;



Jim Chang, the co-founder of Catalyst AMM, said in a post on X that MEV bots began speculating on his shares immediately after joining the app.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Okay no one told me that within seconds of joining <a href="https://twitter.com/friendtech?ref_src=twsrc%5Etfw">@friendtech</a> that MEV bots would speculate on my shares lmao <a href="https://t.co/G0OVXNZKyx">pic.twitter.com/G0OVXNZKyx</a>&mdash; Jim (@0xJim) <a href="https://twitter.com/0xJim/status/1693570464759910872?ref_src=twsrc%5Etfw">August 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“It gives me dopamine immediately upon joining, which is what all social networks strive to do,” Chang told Blockworks. “I don’t know if the Friend.tech team did that on purpose, but it’s a great byproduct of being on-chain.”



Wrapped versions of Friend.tech shares are also available as ERC-20 tokens on Base — and users can track the <a href="https://www.coingecko.com/en/categories/friend-tech">value</a> of their favorite crypto influencers.



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