Is friend.tech Good or Evil?

ICOs, oof, not great. Like NFT mints, oof, not great. But we have to remember that like that part of the market cycle for financial assets exists before and after crypto. And the reason why we don't see it in the in the traditional world is because by the time a traditional equity IPOs on the stock market, all of that speculation by early VCs, the first round of financing, the second round of financing, that's not available to the general public. And so this is the naked truth of markets. And now it's public, and the public is reacting to it.

Is friend.tech good or bad? That's the conversation David and I want to have today. This is a special episode, I think uh an opinion episode, getting into some controversy here. Friend.tech, this is an app that has dominated the crypto landscape for the last two weeks, kind of exploded on the scene, and now it's breaking out into mainstream audiences. These are non-crypto audiences. So should we pat ourselves on the back? Is this a moment for victory lap and congratulations? Or do we need to take a moment to more carefully reflect on the consequences of this new financialized social application? Some questions we're asking today. Is friend.tech good or bad? Are financialization and Ponzi games all that crypto can really give to the world? Is any of this even a correct conclusion? Or maybe we're just moralizing this whole crypto thing too much? These are the conversations I want to have with you today, David. Uh, what are your thoughts going to this episode? Why are we even doing it?

I think on the surface level, friends.tech, friend.tech is a fun, fun game for crypto influencers and their followers to all kind of play together. And I think simultaneously, while that, you know, shenanigans is happening, there's another conversation brewing as to like what are the deeper consequences of an application like this if it does scale to the whole mainstream world? Is this the crypto dream? Is this what it means to be a crypto person? Uh, I don't I don't think a lot of people are here for that mission or that future. And so I think we also need to also define the concerns that people are having about what are the values basically embedded into an application like friend.tech. And we can't seem to, as a crypto industry, create too much other than some form of financialization of things uh that already exist, like social media apps. And so is this all that we have to give? Do we is this what we have for the world? Is hey, here is your web two and web three is web two, but now with finance. Is that really it? Is that and is that what we want? And is that good? I think there's a lot of different little nuances to unpack. And so that's what we're gonna do here on this episode.

Yeah, I think this is a good opportunity to uh to figure out what we really care about and why we're here. And uh any excuse to do that, um we we take it on Bankless. So guys, that's what you're in for today. Before we get to the episode, we want to thank the sponsors that made this possible, including our recommended exchange for 2023. I put the question, is friend.tech good or bad for crypto out on Twitter? And of course, most of my followers, just like yours, David, they they skew crypto native. And I was actually really surprised at what the results were. So uh good, that option, got 53%. Bad got 47%. Let me ask you before we continue this episode were you surprised by results like these?

Certainly, yeah. I was ready for good to mostly dominate the fact that we were basically at fifty fifty. I was surprised as to how many friend defectors there are out there, friend naysayers.

Yeah, and I will say on Bankless um the last couple of weeks, we've been pretty favorable about it. Seems like a new proof-of-concept application. So this is an alternative opinion I think we need to hear. This is Anthony Sasano replying to this tweet. He says, I haven't seen crypto Twitter this divided on something in a while. And I think he's right. We've uh there are a lot of um haters out there of this entire friend.tech experiment, and um that's important to go into. David, before we talk about kind of the the controversy and uh the pros and cons of this particular application, maybe we should spend a minute actually defining what this thing is. So this is what we might call a social fi. That's been a term going around uh lately as a sort of a new narrative, but it's like a social Ponzi game on the layer two uh base. And and notice by the way, I said Ponzi game, which is very distinct from a Ponzi scheme. Um, to us, and you know how we've long used this term, a Ponzi game is completely transparent. You kind of know what you're getting into. Um, I would say, in some ways, Bitcoin is a bit of a Ponzi game, something like Ethereum, ether the asset is a bit of a Ponzi game. I like I even think the dollar, fiat, is a bit of a Ponzi game. It's something that gets its value from narrative belief. So don't be distracted by our use of the term Ponzi game, but um, it's a very distracting term.

term. Specifically the the game element implies a scheme a scheme is a scheme and a game is a game. A Ponzi scheme implies there's a central operator who has differing incentives. And a Ponzi game is simply referencing the fact that in order for this to be successful, we need to have a constant inflow of new people in order for this to work.

New believers.

New believers, yes. And and I actually don't want to necessarily ascribe like whether or not something is a Ponzi game is a very deep and long conversation. And I think longtime bankless listeners who have perhaps listened to every single bankless episode will understand the nuances that come with that term. Um it's got a very negative connotation, and we actually are using it in a very neutral way, I would say. And so I think part of the world of money and finance, like the dollar, it's a piece of paper and people are paying money for it. It's a Ponzi game in the sense that it's almost synonymous. A Ponzi game is almost synonymous with finance. And so I don't want to ascribe necessarily some sort of like opinion to this word Ponzi. It's just like when you go very deep and understand the world of money and finance, you understand that, well, everything is a story and everything is kind of a Ponzi. And what is the dollar? Well, it's a Ponzi that doesn't pop. And so there's a lot of like, there's a lot of connotation baked into this Ponzi word. And I don't want to get distracted by that.

Yeah, so I probably shouldn't have led with this loaded term if you're not familiar with with all of that background. So so let me maybe uh restart that. This is a social game of sorts on on crypto. Social

Financialization game.

Yeah, social financialization game where you can buy and sell your your friends, essentially, or shares of your friends. Could you describe this in a bit more detail, David?

So when you log into this new app, FriendTech, you connect to your Twitter account. And so you need a Twitter account to get started. And that's because you are using your social graph on Twitter to bootstrap your social graph on friend. It's friend.tech. I always want to say friends. As soon as your Twitter account gets loaded up, you are given a base address, and then you load up your address with some Ether and you buy your first share of yourself. And that opens up your room. And any of your shareholders, these are now called keys, any of your key holders can unlock your room so your key holders can start to chat with you. And so every single person on Friend has their own room and they get to chat with anyone who owns some of their keys. I'm gonna I'm just gonna go back to start using the room.

You mean you mean chat room.

It's a chat room. It's a chat room. Yes. And so me as someone who has a bunch of Twitter followers, when I made my room, a bunch of my followers were able to buy my shares and we were able to start to chat with each other. I have 190,000 followers on Twitter. I have uh, I think like 60 shareholders on friends. And so I so that's a much smaller concerted group of people. And these people have paid anywhere between 0.01 to 0.5 ether to be in that room. Um, the importantly, the price of shares is on a bonding curve. And so as more shares are minted, the price of these things go up. If you are a shareholder, you can burn your share at any time and you will receive back the current price of the bonding curve. And so if you bought my share at like 0.01, well, you could sell it today into the bonding curve for 0.5, uh, because that is how much one of my shares is worth. And so this is where it starts to get into a little bit of a financialization system. Uh, the more shareholders you have, the more expensive you you are, uh, which is kind of what a free market does. The only thing that's different is that this is on a fixed curve. Uh, and so a lot of influencers, oh, and uh also importantly.

When you buy or sell a share, there is a 10% uh tax that is charged. And that tax is split 50-50. One half goes to the creators of Friend Tech, and then the other half goes to the uh the person that you are selling that share for. And so me as a and anyone on the app, they also accumulate trading fees for anyone who is buying or selling your shares. And so you get more money as people sell or buy your shares.

So as a creator, uh you are essentially getting trading fees anytime someone buys or sells. So so you want you kind of as a creator, you sort of I'm c I'm using this term creator, but I think creator is the right term.

I mean that's

Okay, creator, influencer, these things might be synony synonymous in the rest of this conversation. Uh you're incentivized towards volume, I suppose. That's one incentive

volume, yeah.

And as an owner of these shares, again they're called keys, but we'll use that term synonymously again. As the owner of these shares, your incentivized towards a number goes up. Yes. Right? You start to get more bullish. And what's interesting here is you have you said 190,000 followers on Twitter. It's free on Twitter to follow David. Okay. To get access to this room costs money. And it costs money to an increasing degree, which uh is a completely different game that we're playing. The other thing I guess I'll mention is of course, this is all on DeFi Rails, right? Right. So that means uh this is smart contracts, everything's very composable. I think I saw maybe last weekend, David, though you've been tracking this much more closely than I have, like the ability to sort of export these friend shares, these friend keys as an ERC20. So I could like start to buy David shares if I want on regular Uniswap um bonding curves. Is that correct or correct? Or it's like these things are plugged into other areas of the open DeFi economy.

Yes, that's right. It's a money lego. And so some pe some people were uh able to make a contract that buys or sells shares on the bonding curve and then also turn those shares into ERC20 tokens that can be built into Uniswap. So it's pluggable in with the rest of DeFi's composable.

Okay. Now, uh, the question that my mind goes to is like, oh, cool, we've created something uh neat we think is neat, or some segment thinks is neat. Is anyone using it? What is the answer to that question? Is anyone actually using this thing?

The answer is definitely yes. Friend Tech got released about two weeks ago. 110,000 unique addresses have connected to base and to FriendTech. So that is 110,000 unique Twitter accounts. And so while we typically don't ascribe unique addresses to unique users for many reasons, this one actually has stronger assurances than other platforms because of the connection to Twitter. So that is basically call it 100,000 people inside of two weeks.

And some people from the web 2 world are not impressed by those numbers, but let me tell you in crypto and web 3,

Yeah.

these are big freaking numbers.

Market.

Like our biggest apps don't see this kind of uh daily active, monthly active type of activity in crypto. So our our apps, crypto apps are are most often um you know, I guess sized based on value in assets under management or total locked value, these types of measures. So when we see a large group, a large of real humans using an app, that's a pretty big freaking deal. I also saw like tweets from Brian Armstrong, um, for example, the transactions per second that a base is serving up has now surpassed Ethereum. And a lot of that traffic is driven by this uh this application, the friends.tech application.

We're at 2 million total transactions from Friends. And then also there's 21, almost 22,000 Ether in trading volume, which is about $38 million. So $38 million have changed hands because of this application. Now, reminder, that's 10% of a fee is taken on all of that trading volume. So that's, and then that itself is split down the middle between creators and the team. And so that's basically almost $2 million in revenue for the team and almost $2 million in cumulative revenue for all the creators on the app.

I mean not bad for two weeks, right?

Yeah.

And this thing looks like it might be picking up more steam, even though I think volumes are down like the last twenty four hours or so. This looks like it's leaking into mainstream, almost in a way that um NFTs did. What are we looking at here, David?

Yeah, so this is just a composite of a number of different things that I saw on Twitter. Uh we have on the top left FaZe Banks, uh Gracie Hardy, Grayson Allen, as new people playing in Friends. FaZe Banks is a YouTuber, Gracie Hardy is an OnlyFans creator, Grayson Allen is an NBA player. So three different, very different corners of the internet.

Yeah. Uh we also have Disclosure, who is a DJ duo, very crypto native DJ duo duo. Uh friends with the Delphi Digital guys, and Delphi Digital got them into friend tech. And then on the right, we just see what is what was my home screen where you can just kind of see global activity. And like I know what a crypto person is and who they are, and I can definitely tell that the uh Kesu Heart only at fans in bio person is not a crypto person. That is an OnlyFans creator. And so you can just see the different um people that have shown up for uh you know using FriendTech. It makes sense that um who's next in going to after the crypto natives to adopt this um platform? Well, it's gonna be creator economy folk, and that's that's gonna be OnlyFans uh and also YouTubers, people who create and have fans, just general social media type stuff.

So there we go. This could go from a uh crypto native sort of toy to mainstream very quickly, right? And uh that's what we see happen to NFT. So it's not unprecedented even in crypto for us to get these breakout applications. And this shows hints and signs of a major breakout application. Of course, it might not be friend.tech, it could be some other social uh finance application that's using a similar mechanism, but like it's early and it's showing signs. As I mentioned in the intro, um, David and I, Bankless, has mostly been supportive of this experiment. I mean, it seems fun to us. Hey, people are using our apps. It's great, it's crypto, right? It's it's DeFi. Um, it's getting private keys in the hands of of more people. I think there's some question as to what how non-custodial this wallet is. The implementation details aside, this has the potential to get usage on layer twos up. Uh, and uh that's always a good thing. More people, more block space, more apps that go mainstream. The worst case scenario for me for crypto is like we build all this stuff and no one actually uses it. Um, but and this is what I think the rest of this episode is about, there's also some arguments against this. Uh, some people in the crypto community, as we mentioned earlier, 42, 43% actually hate this experiment. They're actually uh very much resistant to it. And we want to give air and oxygen to that opinion too, because I think there's some merit here and I think it's worth consideration. So, shall we dive into that now, David?

Yeah, that's it.

All right, so this was a tweet that was brought to my attention from someone uh in the bankless Discord from Autism Capital. You know, uh it's an interesting account here, but regarding FriendTech, it's sad that after SBF, there's no pretense of doing good through crypto anymore or even trying to change the world for the better. No more talk of decentralization, no saving the world, no conviction at all. Vitalik is quiet, all the old layer one promoters are quiet, all the loud voices have cashed out and gone silent. There was nothing learned from the last cycle of scammers, shitcoin promoters, and massive founder secondaries. You were all dumped on by these guys. Now you're allowing yourself to be dumped on again with this new bullshit. You learned nothing, and now the shell of crypto is all purely PvP from the other guy now. The NFT scumbaggery managed to get even worse. Concentrated, zero value creation for the world, absolute Moloch. Congratulations, you played yourself. And in the short term money grab, you're cheapening the broader narrative of crypto being a force for change for a short term fool's game. And the response to this will likely be LOL, STFU, I don't know, I'm making fees.

Wow.

Yeah. Oof. Pretty, pretty hard-hitting statements. There was also a take from a bankless citizen that this tweet uh spawned a conversation inside of the bankless uh Discord. And so the the citizen said, in my opinion, it's incredibly reckless, and I lose respect for anyone who is presenting this app as some kind of breakout web 3 app. Have fun with it if you want until you lose your money. But it has nothing to do with Web3 or crypto values. The entire premise of financializing social relationships is also, in my opinion, a contemptible concept, worthy only of mockery.

Big influencer accounts found yet another way to extract value from the herd, so this craze will continue until the next fashionable Ponzi is unveiled. It's not what I signed up for, but let's face it, no one gives a damn. If you have.eth in your name, it's just experimenting and anything goes. Who cares that I'm shilling this to ordinary people who are going to get wrecked? Me and all my rich friends are making free money. This is great. All of the innovative tech is just used to create more advanced Ponzies. Now, this is a take that I think I think this is well articulated for the contrarian side of uh friend tech. And this is also a sentiment that I've heard across crypto, um, both inside and outside of crypto. And just overall, I would say this shares a sentiment with a very deep concern about crypto. Like we have many, many apps that look and feel and share some elements with friend tech. And it's about like the underlying structure of these things and concerns about financialization at its very core. And some things I think are very deeply tied to what crypto is. Like crypto almost is synonymous with financialization. I know there's a bunch of non-financial use cases of crypto that we are really trying to crack the nut of, things like identity. Uh, but for now, really the thing that crypto has been able to do is produce more finance than we had before. And I think a lot of people are in crypto for deeper reasons than that, and they get jaded by all of these financialization apps that seem to blow through into mainstream before anything else.

Well, I get it. I mean, like...

Twenty twenty two. That was that was all

Mm-hmm.

Greed inspired, right? That was all I was doing that. So you're the the the the comments that you just articulated. We've also heard that from crypto skeptics who are also fairly crypto knowledgeable, like like Molly White. Like you're just financializing everything, you're just creating pyramid games out of everything and preying on your social relationships. And is that really what crypto is about? So I think the aversion here is crypto just becoming this gambling, greed-inspired Ponzi thing that seems custom built to only serve already rich influencers. All right. That's like when you look at this platform, that's what it kind of looks like. And here we are, we're bankless, right? We're crypto, decentralized values. We're supposed to be changing the world. And we're celebrating this hollowed-out Ponzi game yet again. And people are going there scratching their heads and they're like, is that the best that we we have? Is this what we're offering to the world? Like, and here we are in the bear market. And we've talked about this being sort of the build build market where the tourists are gone, the settlers stay. And uh we're supposed to be building stuff that helps the world, that drives utility to real people. And instead, we're getting caught in these cheap tourist traps. And so people some people are looking at this and they're going, that's not what I signed up for. I'm not saying I agree entirely with that sentiment and we'll discuss why, but I think that's like a summation of it for me.

I think a lot of frustration comes from how readily accepting

Uh crypto was of friend tech. And I and I think the current state of crypto could probably be excused from that. Um because like like what did we have in 2022? We had uh stable algo stable coins that were unbacked completely blow up. We had a Ponzi that went to zero, and now everyone hates crypto, and we are desperately seeking validation from mainstream society in any way, shape, or form. And so I think um a lot of our standards perhaps are lower than they otherwise would be because we finally have these protocols that we're pretty proud of, I'd say. We have base, the layer two, that everyone is really optimistic about.

The transactions are cheap.

And the transactions are cheap and free, and the UX is great, right? And onboarding so fast. And so this a lot of crypto is like look at look at what we can do. Look at this latent power that we have. As soon as somebody can figure out how to put all the pieces together, we will have explosions of mainstream applications. And so I think crypto, and myself included, are the reason why we accepted Friend App, uh Friend Tech so quickly is because of this. Yes, it was with this financialization of social relationships. Um

And yes, I like as soon as I got into friend tech, I was like, oh, this is a transfer of wealth from small to large. This is what is built in here. Like, am I going to like me as a as somebody with 190,000 followers, I go into friend tech and I immediately get 0.4 ether from trading. You have an advantage, obviously. I have the advantage, right? Sure. And and so that, but I'm willing to excuse that because influencers are exist both inside and outside of crypto. And there's no new dynamics here. Like, you know, the people with 1 million accounts on Instagram also get tailwinds of capital and fame and stuff like this, right? So now the only thing that's different is we are taking that same power that influencers have in the first place in web two. And now we're also layering on financialization onto it, which is what happens in web three. And so I think a lot of us kind of excused that element because we were just so stoked to see something actually work and break out out of this bear market.

But maybe it's also fine. I I can tell in your response there that you're de like deeply considering that alternative and you and you're kind of like wondering, well, you know, is this bad? I you I even question the premise of why should you feel bad for this? So you're like, why should any influencer sort of feel bad for this, right? Isn't this just another kind of mechanism? Uh I mean, well, I guess a few things I'd say, and this would be sort of the the opposite take. And then we'll get to what you you and I maybe think about this, and we'll bat this back and forth a little bit though. Um, you know, one take is this is just a pre POC. It's a proof of concept, right? So it's basically like look what we can do with this new SociFi stack. And uh, you know, our transactions are cheap, and this is a layer two fluxing its muscle, and we can get by the app store and Android, and like it might not be this, but like, isn't this great? We're selling block space. Look at the potential here.

Right. Even if friend tech is evil, the ends justify the means because it shows us the path.

Sure. And there's like, look, we vampire attacked uh an evil web 2 company, right? Isn't that the whole like purpose? Like people are so you know incentivized to port their social graphs. Um, so so that that's one element. And I said on a roll up, I think a week ago, like I've switched bullish on Socifi as a result of of this experiment. But but I also want to question the premise of like why why you should even feel bad about this? You know, because it's transparent.

Right.

Like everybody knows that there is a bonding curve and that like what they're getting if they buy David keys or anybody's keys is just access to a chat room. Like I almost feel similar to how I felt about JPEGs, at least in the early stages, which is like, guys, you're buying a JPEG. It's a picture.

There's nothing hidden there.

There's nothing hidden. This is like, so if you want to value art, like you know, and you think the Mona Lisa is valuable, other other elements of art, and you don't really know why. Well, like, it's all about kind of social cultural value, and that stuff can be so fleeting. But you know exactly what you're buying when you're buying a born ape JPEG, don't you?

I think and I think this is why people were getting excited because say you're not a crypto person, you don't need to explain a bonding curve. Like, oh yeah, when when you buy shares or keys, the price goes up. Yeah. And people are like, oh yeah, that makes sense. Yeah, I understand that.

So that's the thing. I'm not sure that you should feel bad about this, right? And that that's where the conversation is. And there's another retort which is like, what's wrong with with having fun? You know, I I could also say, like, um,

People can't stop it. Right. Right. So another reaction to somebody who is um like worried about this and concerned about this is okay, don't use it. There's lots of games that I don't play in crypto. Like I just choose not to. Like you get to choose your character class when you enter. You can be a trader if you want. You can just stack ETH. You don't have to do it. You can you can get into the NFT community and trade JPEGs, or you don't have to. Like you could just opt out. Yeah. So what do you think about those replies?