If you haven't tuned into CT recently, for the last week, a new social network called Friend.tech has been dominating the timeline and you be wondering what it is and why people are caring so much?

Part-social network, part-chat app, part-hyper-speculative ponzu sauce venue, there's several different dimmensions when it comes to Friend.tech.

What is Freind.Tech and How Does it Work?

Friend.tech is a “social network” in a loose sense. Anyone with a Twitter account can make a Friend.tech account by pairing it with an email or phone number. After creating your account, your followers can buy your “keys.”

Keys (formerly called shares) give access to a private DM service where the share owners messages are public but shareholders are private. It’s like having a giant Q&A where no one else can see anyone but the speaker. This clears up a lot of the spamming that you normally see in Telegram (at least for the shareholders).

Shares are sold on a bonding curve. Each share is progressively more expensive than the last. Current shareholders can use the fixed bonding curve to sell back into the market at anytime they choose, turning DM access into a trading game.

When any shares are bought or sold, a 10% cut is taken. 5% goes to the share issuer (influencer) and 5% goes to the protocol.

And that’s about it. The app is invite only and highly incentivized. They dish out points every Friday and there is most definitely going to be a future airdrop.

Ok, But it’s a pOnZi?!?!

Maybe, who knows. Key prices go up and down. Some people win and some lose.

We can say that the 10% fee charged on both buys and sells is HUGE and is one factor that will lead to most people losing money. Over the last two weeks, users paid more than $3.8m in fees. If it could sustain these levels for a year, the protocol would top over $100m fees, which is probably unsustainable.

Even if fees slow to a scant $500k a week, that’s still $26m revenue annually for the team and influencers. Keeping the hype going will be the teams #1 priority for the next quarter or two.

A Friendly Paradigm

After Friend.tech launched with some fanfare, it wasn’t until the following Friday that volumes really started to take off.

The catalyst? Paradigm sliding in the DMs.

Three months before friend.tech’s launch, they received seed investment from Paradigm after partnering with the fund “to build tools for new online social interactions.”

Once the Paradigm news broke, the market went wild. With such a big name VC fund investing into friend.tech, it must mean one thing and only one thing…. Airdrops. Lots of Airdrops.

The Friend.tech team pretty much confirmed this on that Friday by releasing a “points” system where they would distribute 100m points over 6 months. They even said that “Points will have a special purpose once the beta period ends” Right… like counting towards an Airdrop…

Let’s just assume FT makes it 6 months in the depths of the bear market with sticky users. With 100m tokens, post launch market cap of 30m might just cover all the fees paid by users over the time period (token price .30). Typically airdrops range 5-10% of total supply, if 100m is on the high end, its total supply would be 1bn. At $.30 day 0 that would place its FDV market cap at 300m, which is pretty fair value if 100% of the fees go back to token holders upon launch.

The top influencers on the platform like Cobie, Racer, and Ansem stand ready to make millions of dollars for driving traffic and trading volumes to the platform.

My Keys Are Bigger Than Your Keys

Crypto Twitter is vain. They love the numbers. Try talking smack to someone with 100k followers and they'll dunk on you for small account status. With friend.tech the dunking is now in real time, as key prices can wildly oscillate as influencers push their followers to compete.

FT is a full monetization of the social realm. I don't think anyone actually buys keys for DM access yet. Happy to update this article with examples of influencers actually using the FT key access for non-Twitter based content.

But friend.tech does have some serious issues around whether it can keep users holding keys for long periods of time. Influencers are money motivated to bring new blood into the system to buy and sell their tokens. But with the 10% rake, at some point, the fees will suck out a lot of the capital used for speculation. Once the speculators leave, and trust me, they will in droves as soon as volumes decline, the bag holders of the remaining keys might jump ship too when the value of their keys declines 80%, and the influencers stop posting and move back to regularly scheduled Twitter posts.

As prices go lower, there's less money to pay influencers, who get bored and post less, which causes a death spiral and eventually FT becomes 2023's Clubhouse after Elon quietly integrates the best features into X's subscriber model.

Speaking of subscribers, influencers are incetivized towards volume rather than duration holding keys. Selling keys is GOOD! Higher volume = higher rake. And since the bonding curve mechanics imapart volatility as a byproduct of volume, massive swings in key prices will be the norm. Once volume dries up, volatility will die, and so will the platform.

We're already seeing volumes return to earth this week, with protocol fees dropping to $3k hourly, which still is $26m ARR. However, this should fall even further over the next week or two.

What's a Dapp?

Even if FT dies in the next week, a new meta has been born. Here's the stack.

• Progressive Web App
• Web2 Login
• Embbeded Self Custody Wallet (Account Abstraction)
• Cheap L2 Fees
• No App Store fees!!!

FT deeply shifts what a platform is in "crypto."

Friend.tech is the first PWA I've ever used. I never even knew that you could save a website to the homepage. FT is a quasi browser app. It's not distributed through the app store, which means that Apple/Google doesn't take a cut.

For years publishers bowed the knee to Apple paying tribute with 30% of all sales. Apple's walled garden has stood strong against worthy challengers like Epic Games/Fortnite, which lobbed an unsuccesful anti-trust suit at the tech giant over its insistence forcing all transactions to pass through Apple's payment systems. The draconian fees even forced Coinbase to disable NFT transfers on its mobile app after Apple demanded a 30% fee on all gas.

Instead of trying to wiggle their way through the app store and offload wallet operations to a third party self custody wallet, FT instead used an embedded wallet with keys kept in the Cloud. When you log into FT for the first time, it asks for a phone number or Google/Apple auth, then it requires connecting to your Twitter account (plz go disconnect it afterwards, the permissions are extremely wide ranging).

For normies, other than setting up the PWA, this makes logging into friend.tech similar to every other app they use.

One of the other big wins is that its built on Base, where fees are stupidly cheap and transactions are fast. Plus, Base is/will be directly connected to Coinbase for instant withdrawals.

This new "paradigm" (had to use it) we're moving into is a demonstrable example of how crypto apps can build for the masses. I'd expect a wave of similar PWA apps launching in the next months. Developers now have the blueprint on how to build.

Enter Fraxlend?

With the potential for real economic value to accrue to FT keys, there's an opportunity for Frax to unlock liquidity though Fraxlend.

Sam Kazemian signed up for friend.tech on Friday when the Paradigm news broke. His interest was piqued because:

Technically the shares are backed by ETH since the price is determined by a bonding curve. So it’s possible to lend against friend shares. Liquidations happen into the bonding curve.

All friend.tech keys are sold on a deterministic bonding curve, meaning pricing occurs according to a math function. The price at any time is determined by the amount of shares created. Frax could add any friend.tech asset to its lending market Fraxlend without the need for any external oracles.

For the most popular tokens, this could unlock millions of dollars of liquidity overnight that's trapped in the bonding curve. Even for small accounts, Fraxlend could, in theory, lend to anyone at any price. And with Base fees less than a penny, its not operationally infeasible.

A few roadblocks though... Frax has voted to deploy to base, but it has zero liquidity there to handle liquidations (a robust ETH/FRAX pair would be needed). Fraxlend would also need to be deployed there will special changes made to the code to accept friend.tech keys. It's not entirely out of the question, but the scope and size of this deployment to handle individual tokens is probably outside of the question without hiring or a third party taking on the project.