Launched on August 10th, Base’s rising social media network seems to be already fizzling out. Friend Tech started by allowing social media influencers on the platform formerly known as Twitter to tokenize their clout. People who buy shares of their tokenized personalities gain access, such as access to a private chat through the Friend Tech app.
Leaving some red flags aside, people could sell their shares if the demand for personalities exceeds the profit range. Influencers themselves gain 5% of their shares’ trading volume.
Within a week, this concept proved fruitful, racking up 259.53k transactions among 23.72k unique buyers. However, as August closes, Friend Tech activity has dried up. Since the peak at 39k transactions on August 21st, the app barely touches the 2k transaction threshold.
Likewise, Friend Tech protocol inflows are now hovering under 30 ETH, far below last week’s 500 ETH range. Friend Tech accrued 2,386 ETH ($4M) in fees from the hype, taking in 47,749 ETH ($81M) inflows across 2.4 million cumulative transactions.
Since last week’s peak of $1.68 million in fees, the protocol is now attracting only $161k as of August 27th, according to DeFiLlama data. Although the present $80k revenue is still solid considering the single-digit developer count, the over-90% drop in protocol fees does not bode well for Friend Tech’s future.
Tokenized Clout: Faulty Concept?
Friend Tech’s high-mid charts are reminiscent of NFT speculation sprees. This is no coincidence, as the concept is the same. In both cases, they rely on the initial speculation drive. Instead of unique artwork, Friend Tech tokenizes hype around unique subjects – influencers.
In total, 123.5k unique subjects have come on board. But only a tiny percentage have enough Twitter followers to make it count.
Moreover, the purported reason for buying shares, private access, becomes secondary to later selling shares at a higher price. This speculation itself is unsustainable. And as the surge wanes, the shares of tokenized personalities drop in value, just as we’ve seen with NFT collections.
Racer’s Third Major Project
Interestingly, the second-highest earner on the Friend Tech list is Racer, the originator of the protocol under oxRacerAlt Twitter handle. His previous project, TweetDAO, had also died out. The concept was similar, except that tweets were tokenized as tradable NFTs.
This drew much criticism as only the NFT holders could influence the public forum. Alongside TweetDAO, Racer co-founded Stealcam. The project tokenizes private photos and videos but is pixelated. Through an auction mechanism to “steal” the content, buyers then remove pixelation to reveal the content.
Bots Confound Value
As decentralized layer 2 on top of Ethereum, Brian Armstrong’s Base network has seen no shortage of hype-bound tokens. At the end of July, the surge from memecoins alone was tremendous, skyrocketing Base’s total value locked (TVL) by 3,000%.
Friend Tech is Base’s largest single mover, pushing Base TVL to a new peak of $225.3 million last Friday. Brian Armstrong admitted it was mainly from Friend Tech. The problem is, just as with NFT speculation, much of the activity is driven by bots.
This is a bigger problem for Friend Tech as it disincentivizes influencers. Known to manipulate the order of transactions, bots can buy shares (now renamed to “keys”) from the creators at a cheaper price. In turn, influencers have to buy their keys at a higher price.
Regular users on the secondary market face the same disincentives. On the flip side, as Friend Tech activity collapsed, MEV (Maximal Extractable Value) bots have equally dropped, now accounting for 0.7% of transactions.
So far, Base is not experiencing the same wind down as Friend Tech, having a stable TVL at around $201 million.
Another Failed Social Media Experiment?
The most exciting aspect of Friend Tech is that it treats Twitter as social media’s base layer. This is quite similar to how Bitcoin acts as the base layer for the crypto market, underpinning all cryptocurrencies.
In both cases, the entrenched network effect is in play. This externality makes the underlying asset more valuable the more people use it. This is why Friend Tech centered around Twitter. Even Meta’s Threads engagement dropped 70% after the launch.
“In its current form you’re basically looking at an unintended ponzi w/ first in/first out because there isn’t any product feature depth to create stickiness or retention, so creators will churn quickly, users will be left exiting creators, etc.”
Ryan Wyatt, former Polygon Labs president
The way Friend Tech was executed, reminiscent of NFT Ponzi schemes, makes it even less likely to provide a proper engagement alternative. Extending what Ryan Wyatt noted, one has to ask if social media engagement is already mentally taxing enough without additional layers.
This article originally appeared on The Tokenist
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