Friend.Tech: A Revolutionary Scam, The Revolution of Scams, Thoughts on SocialFi

What is Friend.Tech?

"Friend.Tech is the marketplace for your friends." In simple terms, users can issue their personal tokens on Friend.Tech, and users holding these tokens can access exclusive content from the issuer. It is recommended to experience it first before criticizing.

What is good about Friend.Tech?

Friend.Tech is a good application in my heart. What is a good application?

In my view, a good application is defined by "usable and useful" as the foundation, "crowd and scenario" as the ceiling, and "sustainable monetization ability" as its vitality.

From the perspective of "usable and useful," Friend.Tech meets the basic needs of retail investors, ecosystems, and VCs; it differentiates itself from existing products in terms of "crowd and scenario" and has the potential to generalize beyond just Crypto users; at the same time, its business model aligns well with its product model.

The current situation is that different chains are somewhat like individual casinos, with users and projects acting as gamblers and games within the casino.

The differences between casinos are that some are entirely new brands, while others are endorsed by established names; different operational methods determine the reputation and safety of the casino. However, more similarities exist, as most casinos are still under construction/expansion, hoping to accommodate more guests and more complex games. However, a large casino space is a necessary but not sufficient condition for high traffic; for example, safety can only ensure that the money in the casino does not decrease arbitrarily, but does not guarantee the fairness and safety of the games; for instance, many do not have reliable business models and do not profit directly from the actual results of the games.

In the past, casinos have been focused on "building ecosystems," with the standard for success being "ecosystem prosperity," incentivizing users and developers through grants and airdrops, resulting in "everything available but not prosperous." It has gradually been discovered that users and projects are mostly the same batch, with severe project homogenization, and users primarily engaging in false prosperity through airdrops; once grants are exhausted and airdrops end, people leave immediately. How to more actively attract users through factors other than airdrops, support quality projects, and make good ecosystem investments is something every casino needs to consider.

The primary goal of Crypto users is to make money, so for each casino, giving up the fantasy of building a user base naturally will lead to actively embracing projects or MEMEs that may bring wealth effects, and FT is precisely such a project.

Thus, from the perspective of "usable and useful," current on-chain Web3 Native products need to offer users "participation and profit," provide the ecosystem with "launch and user acquisition," and finally, for VCs, "user engagement and imagination (becoming an entry point for a large number of users into Crypto)." Friend.Tech meets this criterion.

Why is FT a revolutionary scam?

The revolution lies in the fact that while general project teams open games in the casino, Friend.Tech opens a small casino within the casino, issuing assets and leveraging Bonding Curve, allowing each user to experience the entire process of issuing tokens, controlling the market, and empowering themselves, essentially becoming a project team themselves; at the same time, from a mechanism perspective, as long as there are influential users who have not joined the ecosystem, users can always expect new launches.

The scam aspect is that, overall, the Bonding Curve-dominated mechanism lowers the cost of becoming a project team or market maker, attracting a large number of users and funds, while also leading to users' apparent profits being inflated, making the path to breaking even long and arduous.

Before explaining further, let’s briefly introduce some basic mechanisms of Bonding Curve and Friend.Tech:

Account: Bind Twitter login, inheriting Twitter's Profile.
Price changes: The initial Key price of any room changes with the number sold, increasing exponentially, with the specific rule being Price = Supply^2 / 16000, which is the Bonding Curve.
Transactions: Keys can be traded at any time, with a 10% transaction fee for each trade, 5% going to the room owner and 5% to the protocol.
Points: Based on user behavior, the project team will distribute centralized point rewards weekly.

This mechanism leads to:

Key prices increasing exponentially, with steep changes. In the early stages of the product, it is easy to create a myth of wealth on paper to generate FOMO, enticing more users and funds to enter. Estimates suggest that a room with 10 Keys has a price of 0.00625E, 20 Keys at 0.025E (4x), 50 Keys at 0.15625E (25x), and 100 Keys at 0.625E (100x).
Infinite liquidity but low liquidity. Each user transaction interacts with the pool, allowing users to exit at any time but with high taxes; the product does not require a large DAU to sustain itself.
Cost and profit calculations become complex. The trading price of Keys does not consider transaction fees when displayed on the front end, and the selling price does not align with the front-end display price.
Existence of Alpha. All users follow the same price curve, but clearly, not all users hold the same value; the Twitter registration mechanism allows users to estimate prices without operations upon launch, meaning every new launch has speculative potential.

At the same time, behind this set of rules:

Point rules control user behavior, aligning with the platform's development stage. From initially allowing self-holding to attract funds, to encouraging (3,3) to promote trading, and then incentivizing total holding value when TVL growth is low, reducing liquidity to maintain market stability and slow down crashes.
The more expensive the Key, the harder it is to break even. Figure 1 shows a price change of a Key, with the horizontal axis representing the total number of Keys, the blue line representing the current price of a certain room's Key, the orange representing the cost of buying a new Key at the current price, and the gray representing the income from selling a Key at the current price. It can be seen that as the orange and gray lines aim to reach the same height, the gap in the horizontal coordinates increases, meaning that as Key prices rise, the difficulty of breaking even through trading increases, requiring more buyers.
False paper holdings, the cheaper the Key, the more loss upon selling. What is the real value of a user's holdings? According to the economic model, Price = Supply^2 / 16000, with a 10% transaction fee for each trade, users naturally believe that after selling their holdings, they can recover about 90% of their holding value. However, this is not the case in actual transactions. There are two factors here: the impact of holding multiple Keys in the same room on holding value and the effect of the actual selling price not equating to the displayed holding price. The buying price of a Key is based on the current Key Price, but the selling price is based on the price after selling, and fees are charged based on this. For example, if a user holds a Key priced at 0.046E (corresponding to the price of 27 Keys), the selling price would be 0.0425E (corresponding to the price of 26 Keys), and after a 10% fee, the actual income would be 0.038025E, only 83.4% of the displayed holding value. As seen in Figure 2, the actual value of a user's holdings is always less than 90% of the holding value, and the lower the Key price, the more discounted the actual holding value becomes.

In summary, Friend.Tech, through a mechanism that can quickly create FOMO and continuously generate non-consensus assets, can rapidly attract new users in the early stages of the project; however, the downside is that as expectations and consensus around the rooms form, the wealth effect diminishes, and after attention shifts, growth stagnates and enters a downward trend. At this point, as users begin to frequently sell Keys, they will clearly notice unexpected losses, further reducing their investment desire, leading the project into a death spiral ♻️, becoming a scam.

In the face of this situation, the project needs to reconstruct the expectations of existing assets while finding ways to introduce new assets.

Why is FT a revolution of scams?

When discussing whether Friend.Tech truly has value or is merely a mining game cloaked in DeFi, the voices denying the product's value far outweigh those recognizing it. It seems that both the critics and supporters of FT believe it lacks intrinsic product value, attributing its success to external factors such as Paradigm's backing and correct technology choices.

In this discussion, we will try to avoid considering these factors and instead focus on the value provided by the product itself to think about what makes Crypto Native applications unique. If one always holds the view that "users only use products to make money, which is unsustainable like a Ponzi scheme," they may miss the next wave of opportunities in the Web3 application layer.

Although Friend.Tech is a scam, it also has the potential to promote itself to a larger "crowd and scenario," becoming a revolutionary product.

It meets a latent demand: based on Bonding Curve, it opens up monetization pathways for valuable but operationally incapable users, helping users unleash their potential value, rather than just being a Crypto version of knowledge payment. The main target audience of Friend.Tech's model is not 1,000 die-hard fans, but rather the next new user.

First, let's discuss what FT is not.

Firstly, it is not a knowledge payment platform for professional operators. Paid groups are not uncommon in Web3, with mature products like Discord, WeChat groups, Telegram, and Knowledge Planet, as well as established subscription-based business models, providing better long-term operational guarantees for fans and operators. Therefore, Web3 does not need a native knowledge payment platform. Observations show that while users may share Alpha information on Friend.Tech, the main battlefield for Alpha Groups is not on Friend.Tech. In other words, in terms of product nature, Friend.Tech is not a platform centered around professionals, but rather one focused on non-professionals.

At the same time, Friend.Tech also:

Is not like fan economies, where the threshold for fans to join rises rapidly as the number of fans increases, focusing on content rather than emotion, which is not conducive to expanding and spreading group sentiment.
Is not like content platforms, where a creator's income is not directly related to whether they continue creating, lacking motivation for sustained creation and relevant contractual restrictions.
Is not like social media, which does not provide public sharing or communication channels and does not rely on user interactions and connections to operate.
Is not like dating apps, where it is difficult for users to establish lasting social relationships under the influence of interests.

So what is Friend.Tech? All of Friend.Tech's designs lead to one word: "fast."

A simple comparison shows that for an individual user wanting to "start" a paid group, the considerations when using Friend.Tech versus not using it are:

The comparison reveals that on Friend.Tech, if users want to monetize themselves, they only need to do one thing: register.

Room owners on Friend.Tech do not need to make commitments or plans; they can start a monetization journey with their audience and fans, with room prices dynamically balancing based on the owner's operational willingness, market demand, and actual operational results. This reduces the mental and physical wear and tear of a long preparation period, improves monetization efficiency, and shortens the positive feedback loop.

Monetizing knowledge is a gratifying but multidimensional skill that requires manpower and energy for preparation, growth, operation, and long-term maintenance. However, with Friend.Tech, anyone can easily start their personal monetization (or exploitation) at any time, freeing themselves from the cumbersome "preparation" and separating the laborious "operation," allowing them to get started immediately upon registration.

Thus, whether it is well-known users whose time value is hard to price or capable but not skilled operators, they can easily join the wave of personal value monetization, needing only one person to recognize their value to start generating income, which sounds much simpler than needing 1,000 die-hard fans, doesn't it?

Currently, there are many capable individuals on major platforms who can only monetize through increasing their influence and then through advertising traffic. There are many reasons for this, such as lack of energy, being inherently unskilled in operations, or users being unable to quantify their value or standardize their value into sellable services or products. The overall monetization path is long, with many details, and the preparation is very cumbersome. However, the Crypto-designed social market allows users to efficiently utilize their spare time to generate returns without being limited to specific forms.

This may be where Friend.Tech, aside from the Ponzi and high speculation brought by value fluctuations, can create positive externalities and expand to a broader crowd and scenario.

In addition to the innovations brought by the experience, there are some interesting observations that have yet to be fully explored for feasibility. The characteristics of Crypto have brought a new traffic distribution logic to the platform, shifting control of traffic from being entirely in the hands of the platform to giving users a certain degree of autonomy.

In traditional social media, users rely on conforming to platform rules or directly paying the platform to gain traffic. However, in Friend.Tech, users are given more choices based on on-chain data (such as directly depositing to addresses, raising room Key prices, and engaging with top users (3,3), increasing on-chain activity, etc.) and publicly monitorable content like Twitter Profiles, many users have built their monitoring systems. Isn't this monitoring system itself a new asset-based traffic distribution logic, with these investments not directly belonging to the platform? Perhaps, at present, ordinary users find it difficult to compete with top users from the perspective of asset prices, and in the future, traffic may concentrate more in the hands of a few. However, what if new asset discoveries occur, combined with this logic and personalized recommendations? There may be new paradigms.

In summary, Friend.Tech is a true Crypto Native product that relies on the principles of Crypto to enhance the efficiency of traditional models and capture unmet demands, potentially providing value that generalizes from Web3 to Web2. Even if it is a scam, it remains a scam that could spark a revolution.

Finally, a word about operations: compared to StepN's community operations, Friend.Tech's investment in operations is minimal, with even the founder's Twitter account being locked. In the two months since its launch, FT has experienced four major growth spurts, primarily driven by external factors such as traffic boosts from Paradigm and Coinbase and offline social dissemination at Token2049. However, there are still some practices that can be learned:

"Operations" is about choosing the right methods based on the project stage, leveraging core resources, and enhancing business value. FT has done well in attracting initial top KOLs as seed users:

Focus on Web3 users, with an invitation system ensuring early invitees receive low-priced tokens, helping customer experience. The advantage of focusing on Web3 users is that they have a high tolerance for products, strong investment willingness, and a significant consensus gap, while early adopters have higher user stickiness. The invitation system also ensures that early users can obtain relatively lower-priced tokens and further assist in publicity by leveraging their influence.
Treat Twitter as infrastructure, simplifying the product and lowering barriers. Although many people often say that Friend.Tech inherits Twitter's user relationships through registration, reducing migration costs, strictly speaking, Friend.Tech inherits Twitter's Profile and basic functionalities, focusing solely on enhancing the room owner's experience in opening rooms and the user's trading experience, without needing to worry about how room owners gain attention, allowing everything related to traffic to occur on Twitter. Because of this, Friend.Tech does not need common basic functionalities found in content platforms, such as room previews and squares.
Do not restrict opening bots, providing initial positive feedback and further attracting funds. The existence of opening bots provides initial income and positive feedback for a large number of newly registered users, and can also create topics by rapidly raising the Key prices of early major users to satisfy vanity, playing an important role before the product model becomes explosive. At the same time, the presence of opening bots has also created many wealth myths, attracting speculative funds and raising TVL.

Can FT sustain and break through, and what issues remain?

After discussing the advantages, let's talk about the existing problems of FT, hoping to provide references for the subsequent optimization of similar products.

I personally believe that Friend.Tech will continue to have vitality, but it is difficult to expect breakthrough growth in the short term. The reason for sustainability is that the market is never short of wealth and FOMO, especially in bear markets. It can be speculated that when the market improves and FOMO sentiment is strong enough, users' desire for insider information and Alpha will also increase, making it a product well-suited for harvesting new users in a bull market. The reason it cannot break through in the short term is that FT currently has many shortcomings that hinder its breakthrough, and the external environment is also not conducive. Therefore, before the product is improved and trust is rebuilt, its potential for breaking through is minimal. However, since the specific gameplay of the token has not been launched, there is still hope for the team's and Paradigm's creativity in economic models and gameplay to bring new ideas and growth.

Currently, the potential issues with the FT product include:

Basic functionality imperfections:

Such as various delays and lags, lack of support for multiple content types, and only supporting ETH payments.

Optimizable directions:

Enhance room operational capabilities, launching more features to assist room owners in refined operations. For example: 1. Helping convert quality Key Holders into room value, such as opening group chat features; 2. Helping room owners efficiently differentiate Holders, such as different entry costs, holding quantities, holding times, etc.; 3. Helping room owners receive feedback from content, such as interaction statistics of Holders with the room owner's content; 4. Helping room owners showcase themselves from more dimensions, such as yield rates from a specific address or recent transactions.
Mechanically provide room owners with more benefits, while Tokens/points mainly incentivize Traders. For example, changing the revenue-sharing ratio of transaction fees; some may argue that the current mechanism's 10% fee compared to traditional platforms' 20% is not high, but from another perspective, the transaction fee portion is the user's consumption, while the pool entry portion is investment, effectively taking 50% of the income from content-providing room owners. The overall mechanism leads to Tokens being the primary operational motivation for room owners, while the fee structure is merely the platform's revenue model, creating a misalignment of interests between the platform and room owners. Tokens serve as leverage, needing to be leveraged on both ends.
Value discovery of rooms to stimulate more transactions. Currently, operations rely on room owners to self-promote on Twitter; perhaps it could automatically recommend content from rooms that users do not hold but may be interested in.
If considering introducing more user groups, it may be worth lowering the entry threshold from the economic curve and enriching the charging methods after entering the room. Similar to how Yellow Twitter charges upfront and then fees later.

Points to consider carefully:

Investment and consumption are blurred for users. From the experience perspective, users naturally view purchasing keys as an investment behavior, with the key price being their input, and do not perceive the wear and tear of a single buy-sell transaction as consumption towards the room owner. Being both consumption and investment sounds appealing, but it may affect users' expectations and behaviors when using the product, leading to dissatisfaction on both ends.
Price change rules are very unfriendly to latecomers. The current mechanism is that the later you buy, the more expensive it gets, requiring more buyers to break even. This rule does not encourage more people to invest and may conversely mean that early holders of low-cost tokens need to take greater risks for more users to enter before they can break even, while those entering at high prices later may require fewer buyers, which could be a more reasonable mechanism?
The fee structure undermines trading enthusiasm. Users' perceptions of their costs and returns are counterintuitive; initially, users may be deceived by superficial data, but once familiar, they will realize the high probability of losing money and significant losses. Upon recognizing the truth, users will choose to exit, selling but not buying, rather than calculating returns.
Balancing a single economic model with product complexity. The benefit of a single economic model is that the product is simple and easy to use, but it can raise user thresholds and limit the types of room owners. For instance, if a room owner providing consulting services moves to the FT platform, if the transaction fee for a complete buy-sell of a Key is considered the payment for the buyer, the room price would need to be at least ten times the original consulting fee to match the room owner's original income, leading to a high threshold that may cause some potential users to drop out. At the same time, the current mechanism is also unsuitable for content-based room owners with stable output, like OnlyFans creators whose content is a relatively stable infinite resource; exponential growth is more applicable to creators operating around limited resources like attention, time, and Alpha, where driving prices up based on limited demand makes more sense.
Token roles and point weights. Currently, the rules for point distribution are mainly based on holdings, and the differentiation between room owners of similar value seems minimal (if there is any, I haven't found it). If this rule continues after token issuance, it may not be conducive to platform activity. Perhaps room owners could be treated like mines, with some yielding high returns and others low, and in the process of circulating between mines, continuously reshaping consensus around the mines to regain attention and stimulate a new round of transactions.

External environment:

The overall number and types of active users in Web3 are limited, capping the upper limit. Familiarity with gameplay and the formation of consensus lead to gradually diminishing potential returns, and as attention shifts, growth bottlenecks occur.
Web2 remains distrustful of Web3/Crypto, and the risk of harvesting fans may hinder the introduction of Web2 users.
Observing previously successful breakout products, their characteristics include rapid positive feedback from single or few deposits and on-chain interactions, such as being misled by community hype when buying NFTs or quietly grinding in GameFi. Friend.Tech currently struggles to achieve this.

Views and Insights on SocialFi

Is there an opportunity for Web3 social?

When discussing Web3 social products, the most common statement is "there is no demand." So what is social demand? Social can be summarized into a model: "people" are the smallest unit; "sex," "communication," and "maintenance and expansion of relational chains" are the basic structures; "face," "content," and "relationships" are social assets; "pleasure," "recognition," and "leverage" are the ultimate social goals.

From this model, social "demand" has fundamentally not changed, but mainstream social products have undergone shifts during the development of the internet, and new forms of social interaction have emerged. Therefore, it is inappropriate to dismiss the potential of social products with the phrase "there is no demand."

Demand may change, forms may innovate, and relationships between people can evolve from mutual attention (adding friends) to one-way attention and then to bilateral matching. The distribution methods of content can also shift from media-based on popularity to personalized recommendation feeds, with the paradigm of social interaction continuously innovating.

In my view, Web3 Social is still worth looking forward to. On one hand, there is a need for application-layer products on the current chain, and VCs will continue to experiment and invest in this direction; on the other hand, if one believes that more and more users will use blockchain, that digital life is a trend, and that more digital assets will become new social assets, then there will certainly be a demand for on-chain social products. Social products may not necessarily bring new users into Crypto, but when a sufficient number of new users enter Crypto, they will need social products that meet their native needs and habits.

Don't dismiss "there is no demand" too easily; what other issues do Web3 social products face?

1. High entry barriers, small user base. Social products that rely on new users to provide vitality have high entry barriers and customer acquisition costs, making it difficult to form network effects.

2. Prejudice against Crypto; currently not suitable for content platforms and social media. For a non-Crypto creator with sufficient influence, reputation and credibility are crucial. It is very challenging for a user with enough influence to risk being criticized by fans for "harvesting" and to lead fans from an old platform to a new one.

3. Decentralization is both a selling point and a risk; issues with harmful content and gray markets lack good decentralized solutions, but they severely impact the experience of social products, as seen with Nostr.

4. The demands promoted by Web3 Social applications are often secondary. For example:

Privacy, decentralization, and security. While many users criticize centralized social platforms for lacking privacy, security, and decentralization, what users actually want is for centralized platforms to be more private and secure, rather than a new platform that is private and secure. Decentralization, privacy, and security are new demands that arise after users' needs on these platforms have already been met.
Universal identities that traverse the internet. This is an unrealistic demand from KOLs; most ordinary users want to be "momo," with diverse identities and roles, engaging in different communities. Compared to a unified identity, blending into the vibe and community is a more natural behavior in social interactions.

5. Often trying to solve problems that arise after centralized platforms achieve network and scale effects. Such as lack of data ownership, unreasonable profit distribution, centralized control, and lack of privacy. Incorrect benchmarking leads to illusions and misjudgments.

6. The impact of differences between Web3 and Web2 is different from past technological iterations. One of the important reasons for considering Web3 Social as a potentially promising track is that many social products with significant commercial value and moats have emerged during the development of the internet. At the same time, with technological iterations, the evolution of social products has also introduced new paradigms that break these commercial values and moats. Therefore, if blockchain is viewed as a new technological revolution, it should also create new social paradigms. However, in my view, past changes in social interaction cannot be separated from several factors: the increasing number of internet users, the shrinking size of devices, and the decreasing costs.

7. Doing social is inherently difficult. Each generation has its own needs and social habits, making it challenging to find a sufficiently large demand or innovation to attract a diverse user base with different habits and needs to migrate their social assets to a new platform. The most common scenario is finding a new group brought about by a new culture, but culture is a product of attention, and attention shifts are an inevitable natural phenomenon. Without new media, tools, and assets, relying solely on discovering a new group to build a new social network limits growth potential, leading to stagnation, user attrition, and an inability to monetize as fate; opening up the imagination space requires a new demand or paradigm with sustained vitality.

Brainstorming: What can social products learn from FT?

Forget the value propositions of Crypto, such as data rights, decentralization, privacy, and creator economy; value propositions can easily deviate from the core.

For example, the creator economy may be a false proposition. Many projects in the creator economy typically focus on three points: 1. Community co-creation, 2. Combining investment and payment, 3. Rights tracing, but generally do not focus on enhancing users' willingness to pay and payment habits. Values and slogans are essential for rallying teams, but to attract comrades, one must first meet the basic needs. Returning to the core elements of social interaction, explore new demands around Crypto, issue new social assets, discover new dissemination logic, and invent new connection methods.

Prioritize assets; try issuing new assets and explore new social models based on these assets. Utilize various pricing mechanisms of Crypto to discover prices for values that are difficult to price within the original system.
Modularize social interactions; modularization does not necessarily have to be infrastructure. In the past, operating an account involved content, operations, marketing, design, etc., being inseparable. However, when FT provides a sample of separating content and operations, can we expect future Crypto to achieve modularization of organizations, changing the current situation where many excellent creators are not good at operations and marketing and need to hire third-party agencies for operations? Returning to the creator economy, the relationship between creators, platforms, and fans will not be simply broken; community co-creation may not necessarily produce profitable content, but can we separate operations, marketing, and design to allow community participation to enhance the commercial value of content? Co-creation does not have to focus solely on content; it can also involve brand co-creation.
Do not create optimized versions of existing products, nor create products or features that require large DAUs as a prerequisite. The former is typified by decentralized Twitter, while the latter is typified by group products that require Tokens or NFTs to join. To build a community, growth must come first; as a new product, there are already few users, and blocking users at multiple levels seems convenient but is, in fact…
Pay attention to the design of airdrop rules; centralized rule design is beneficial for the long-term development of products. Past strategies based on ambiguous airdrop hints, requiring users to explore, are not suitable for application-layer products. Application-layer products should focus on non-chain interactions, utilizing airdrop expectations to influence user behavior without making significant changes to the product (such as adding a lot of new user guidance).
Focus on on-chain demands, such as Friend.Tech addressing the need for insider trading. Whether in Web2 or Web3, users always have a need to meet new people; however, Web2 may have more entertainment and relaxation needs, while Web3 may have more collusion-type needs.
Provide services for large holders, allowing quantitative changes in capital to lead to qualitative changes in experience.

Related tags

Friend.Tech SocialFi FOMO Web3 social

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