The Decline of Friend.tech
Friend.tech, once a promising crypto-social platform, faces a sharp decline in activity and revenues.
Friend.tech, which once promised to revolutionize how we interact with social media influencers, has seen a steep decline in activity, with some even declaring it "dead." But what led to this rapid descent?
Friend.tech, a decentralized application built on the Base blockchain, burst onto the scene with much fanfare. The platform allowed users to buy and sell cryptos linked to their favorite Twitter influencers, which acted as "keys" to communicate directly with them. Within weeks of its launch, Friend.tech's revenues and activities surged, even surpassing established platforms like Arbitrum and Optimism. On August 19, just days after its launch, the platform generated over $1 million in fees in a single 24-hour period.
However, the initial euphoria was short-lived. By August 26, daily fees had plummeted by over 87%, dropping from a peak of $1.7 million to around $215,000. Transaction volumes followed suit, with a staggering 90% decline from nearly 525,000 transactions on August 21 to just 51,000 by August 27.
Friend.tech’s daily revenue. (Source: DefiLlama)
A significant blow to the platform's reputation came in the form of a major privacy breach, which exposed sensitive information of more than 101,000 individuals. This incident and the platform's rapid decline in activity led to growing skepticism among users and industry insiders.
Lisandro Rodriguez, a payments risk manager at Coinbase, was among the first to label Friend.tech as "dead." In his assessment, Rodriguez attributed the platform's downfall to "greed and poor execution" by its management team. He also pointed out the inherent flaws in the platform's structure, where every buy/sell order affected supply and demand.
Rodriguez further elaborated that many creators saw the platform as an opportunity to quickly boost their profiles, leading to a rush of users eager to buy keys. However, as is often the case in the crypto world, early adopters reaped the benefits, while those who joined later bore the brunt of the losses.
The introduction of bots further exacerbated the situation. These bots were designed to purchase new Twitter addresses, hoping that Friend.tech accounts would buy low and sell high. This strategy, however, led to the creation of numerous fake profiles, further eroding trust in the platform.
Friend.tech's trajectory bears a striking resemblance to BitClout, another platform launched in 2021. Backed by notable investors like Andreessen Horowitz and Sequoia, BitClout allowed users to buy shares in famous crypto personalities. However, like Friend.tech, BitClout faced significant backlash and legal challenges.
Ryan Wyatt, former president of Polygon Labs, described platforms like Friend.tech and BitClout as "unintended Ponzi schemes." Such platforms, while innovative in their approach, often lack the necessary safeguards to protect users and ensure long-term viability.