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In-depth analysis of the popular social app friend.tech: Essence or Bubble

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In-depth analysis of the popular social app friend.tech: Essence or Bubble

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Deep Dive into the Popular Social App friend.tech: Is it Genuine or a Ponzi Scheme?

TechFlow, a media outlet, analyzes the recently discussed decentralized social app Friend.Tech. TechFlow compares it with existing apps like Stealcam, Pinduoduo, Zhi Shi Xing Qiu, and Xiao Mi Quan, pointing out that there isn't much innovation in its model. It seems to be another Ponzi scheme built on human greed. However, this greed can lead to rapid development within the Web3 community. "Speculation is a moving feast," describes TechFlow about the crypto world.

Below is an excerpt from the TechFlow article, original link here.

friend.tech: A Moving Feast in the Dull Bear Market, What Insights Can the New Wine in Old Bottles Bring?

"If you are lucky enough to have lived in Paris as a young man, then wherever you go for the rest of your life, it stays with you, for Paris is a moveable feast." - "A Moveable Feast"

In the crypto world, this Hemingway quote can be transformed into: "If you are lucky enough to have lived in the crypto circle when you were young, no matter where you go later, speculation will follow you for the rest of your life, for speculation is a moving feast."

Recently, the feast has shifted to friend.tech.

In the dreary and torturous bear market, an innovative project that triggers FOMO easily diverts all attention.

Ponzi schemes, airdrop expectations, funding rumors, buying and selling shares... Friend.tech appears to focus on social interaction but is essentially financial. Let's be honest, are people downloading this app for social interaction? Obviously not.

After all, in the crypto world, social behavior without economic gain is considered rogue.

So, are you going to be the one feasting on meat at this grand speculative banquet? As of the time of writing, the total trading volume of shares on friend.tech has exceeded 1 million, with over 66,000 independent buyers and 25,000 independent sellers...

https://dune.com/cryptokoryo/friendtech

Is it still not too late for me to join? Before asking this question, it is more important to understand what it is and where it is heading.

Seven Sins and Old Tricks with a New Twist

The sudden popularity of friend.tech is an unexpected development, or is it? From an external perspective, the lack of hotspots in a bear market is a contributing factor, but more importantly, it's about the product design itself.

From a psychological and communication perspective, if a social (or social-camouflaged) product can quickly gain popularity, it owes much to its insight into human nature. In terms of human weaknesses, the classic seven deadly sins in Catholicism include: pride, envy, wrath, sloth, greed, gluttony, and lust.

Prior to friend.tech, in March, the image-sharing dapp Stealcam from Arbitrum already demonstrated the exploitation of "lust" or rather, "voyeurism":

Users can upload an image that is encoded. Others can pay to "steal" and view the original image, with each steal increasing the price by 10% from the previous steal and adding 0.001 ETH.

Doesn't this design of "buying more raises the price" and "buying is equivalent to ownership rights" resemble the trading of shares on friend.tech?

Let's be honest, even if not explicitly stated, what kind of images do you think are most likely to circulate under this product design and interface?

However, the censorship-resistant and rapid asset flow features of Web3 made Stealcam popular at the time. In less than two weeks, without airdrops or tokens, the accumulated trading volume exceeded 313 ETH.

Human weaknesses should not be underestimated.

But is this "pay to view encoded images" model something new? Clearly not. Web2 social apps had already mastered this concept.

In China, QQ had a feature where photos could only be viewed for a few seconds before deletion, and other social apps had features like rewarding to view encoded images and ephemeral content.

Similarly, friend.tech can be seen as an old trick with a new twist, similar to the aforementioned Stealcam, and in a sense, exploiting "greed." However, its design in terms of activation, dissemination, and transaction is more reasonable:

First, let's look at the transaction design.

Similar to buying encoded images, you can directly purchase shares of a user, buying an image implies viewing rights, while buying shares means the ability to have a private conversation with that user. The more popular the image, the more expensive it becomes, and the shares of popular users (KOLs/big shots/wealth cipher experts) will also increase in value.

However, unlike Stealcam, after viewing the encoded image, the next person must act as the counterparty to buy that image; friend.tech does not have the concept of a "counterparty," you can directly sell the corresponding shares of a user without the need for someone else to buy them. In other words, your selling behavior does not require liquidity as a prerequisite, it's instant.

Why is this product considered to be exploiting human greed? The underlying reason is:

  • Everyone has the same knowledge of who has the most social influence, but the speed at which they buy shares varies. With social accounts linked to Twitter, you can easily identify who the big shots are. Therefore, the earlier you buy shares of a big shot, the lower the price, meaning latecomers will need to pay a higher price, allowing you to profit when you sell. Thus, it's easy to trigger FOMO.
  • Earning points just by using the app, with airdrop expectations. When using friend.tech, the menu bar even includes airdrop functionality, indicating that being active on the platform will earn you points, although currently the airdrop is in the form of points. The future utility of these points is not clearly defined, leaving it to your imagination. This makes it easy for users to feel like they can benefit.
  • Don't forget, this is different from just benefiting. Social products have a network effect; more people coming in to benefit can attract more users to use the product, improving the product experience and attracting more KOLs or big shots.

Furthermore, in terms of activation:

friend.tech directly taps into Twitter's social relationships, traffic, and account influence, without having to build a social network from scratch. Using shares as a hook, it parasitically leverages Twitter for dissemination and user expansion.

This leads to users willingly sharing this app based on their existing social circles, pulling more people in and eventually benefiting from the increased shares due to the influx of users.

Wait a minute, doesn't this user expansion tactic of friend.tech ring a bell?

In its early stages, Pinduoduo fully utilized WeChat's massive traffic and existing social relationships, inviting friends and family to "chop a knife" to increase the chances of getting discounts. The more people who helped, the more chances they had to bring in more people, making it easier to buy desired goods at a lower price.

Did Pinduoduo succeed? Yes. Why? Because no one dislikes a good deal, especially in lower-tier areas. In Web3, is there anyone who doesn't like a good deal? Otherwise, concepts like "pig's foot rice" wouldn't have emerged.

Beyond the user expansion tactic, friend.tech's business model is akin to "paid subscriptions" or "knowledge-based payments." Domestic Web2 platforms like Zhi Shi Xing Qiu and Xiao Mi Quan have long been playing with private traffic.

Therefore, from marketing tactics, business mechanisms, and human insight, friend.tech is a clear case of old tricks with a new twist, where each aspect bears resemblance to mature web2 businesses and previous web3 products.

However, the economic incentive design of web3 and the speculative atmosphere in the crypto community, combined with the seed round investment news from Paradigm, have turned friend.tech into a rare hit in the dull bear market.

As the wheels of fate begin to turn, can you benefit from it?

Pitfalls, Hard to Resist Enthusiasm

The more FOMO, the easier it is to overlook risks.

After analyzing the contract code of friend.tech, cybersecurity expert Slow Mist discovered that the contract owner is an EOA address, and the assets in the current contract have reached 2100 ETH and are increasing. It also serves as the recipient address for protocol fees. If the owner's permissions are compromised, the protocolFee could be modified, resulting in losses for users.

Moreover, centralized custody of private keys is a ticking time bomb. In theory, one can only hope for proper management. However, for a mature social app that involves user assets in this way, planting such risks could have broader implications as the network effect expands, affecting a wider range of users in case of an incident.

Additionally, some KOLs have expressed concern that the friend.tech model is prone to ethical risks: for example, a KOL joining the product could maliciously buy someone else's shares at a high price and then blame or report them in case of a market downturn.

While this description may seem far-fetched, it reflects the moral dilemma that influential users face when joining friend.tech: not joining could result in significant loss of income and potential opportunities, but joining and failing to provide accurate and valuable content consistently could lead to reputation damage. After all, a drop in shares can easily be associated with reputation damage and trust collapse.

But as the saying goes, actions speak louder than words. From some English-speaking crypto Twitter influencers, we see that after a rational analysis of the pros and cons of friend.tech, they often still share their referral codes.

"I've alerted you to the risks, but you can try it out."

After all, everyone is willing to pursue profits and try new projects, which is not unreasonable. In the crypto world, there are no foolproof projects, and many are willing to take risks.

Taking a small risk for a big gain is the creed most people follow in the crypto world.

A Ponzi is a Pass for Ponzi Players

Has friend.tech changed anything?

It seems to have altered the conversation mode of Twitter direct messages, but in reality, it appears that nothing has changed.

Firstly, current data shows that those with the highest share holdings are still the big shots in the crypto world, such as Cobie and Zhusu. Their existing influence and power seem to have been proportionally replicated within friend.tech.

If you buy shares of Cobie and Zhusu, will they actually chat with you?

Moreover, the structure of the product remains Ponzi-like. Early entrants enjoy high returns and rely on later entrants reaching a consensus on user value to buy shares, further driving up the value of their own shares of the same users.

For the savvy individuals who entered the scene over ten days ago, they may have already utilized scientific skills, developed scripts, collected data on various big shots, and monitored whether these influencers have joined friend.tech. Once someone joins, they can buy shares from these influential individuals at a fraction of the cost.

The model remains unchanged, but the enthusiasm seems unabated.

As public opinion spreads, more and more people are joining. For example, today's entry of the President of Y Combinator and the public appreciation of friend.tech by Multicoin...

Therefore, it seems inappropriate and unserious to compare a social product in web3 with mature web2 products, disdaining its Ponzi structure.

The audiences, purposes, development stages, and impact ranges of the two are different. Instead of nitpicking and criticizing, it's better to selectively participate. Question the model, understand the model, participate in the model; this seems to be the journey of everyone in the crypto community.

In the brutal and cutthroat world of the crypto community, Ponzi is the pass for Ponzi players, while caution could be the epitaph for the cautious.