Friend.tech, a new decentralized social media (DeSo) app has rapidly become one of the hottest new things in crypto, with over 64,000 new users and more than 24,000 ETH in trading volume since its beta version launch of Aug. 11.
While many crypto industry heavyweights have praised the app for bringing thousands of people on-chain and inspiring sign-ups from even non-crypto figures — such as gaming YouTuber Faze Banks and Russian protest group Pussy Riot — some have warned it’s at risk of burning out.
Built on Coinbase’s layer-2 network Base, friend.tech is a platform that allows users to purchase shares of their friends and influencers, which in turn grants them access to a private chat with that user.
Speaking to Cointelegraph, crypto commentator Yazan pointed out a number of troubling factors that led him to believe the app has between six and eight weeks before both share prices and general activity begin to nosedive.
Let me tell you one thing.
Something isn’t right about @friendtech.
Creators making money from a group chat that doesn’t even work when you can’t even reply directly to people?
The way pricing works is ridiculous and can be easily taken advantage of.
Pumps and dumps. pic.twitter.com/TJqcktEM6P
— Yazan (@YazanXBT) August 20, 2023
Yazan argued there has been an unsustainable rate at which share prices have increased.
“The fucked up market making that guarantees that the app makes the most money along with creators — the price goes up too fast,” he said.
“How come there’s 100 holders and the price is 1 ETH — 1 ETH to be able to see a private chat?”
According to pseudonymous software engineer Cygaar in an Aug. 20 X thread, the price of someone’s shares on friend.tech is proportional to the square of the outstanding supply. As the supply increases, the price increases exponentially.
It looks daunting, so let’s simplify it. Let’s assume that you only want to buy/sell a single share (amount = 1). This is also known as the spot price.
Using our middle school algebra skills, we can expand out the function and we’ll get:
price = supply^2 / 16000
— cygaar (@0xCygaar) August 19, 2023
Drawing parallels to BitClout — a predecessor DeSo app from 2021 — pseudonymous Web3 marketer Legendary shared his bearish prediction on the longevity of Friend.tech.
“Absolutely not. I think the platform will collapse as BitClout did. We are in a bear market, and there’s nothing to do. Everyone jumps on an opportunity to make money, but I…