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An exploration into trending SocialFi platform, friend.tech.

Greythorn Asset Management
8 min readSep 28, 2023

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Friend.tech is a decentralised social media app that allows users to essentially buy social tokens linked to friends/influencers or other users of interest. If a user’s social tokens are purchased, they gain more credibility as they represent a following similar to traditional social media platforms, with their social tokens increasing in price as their credibility does.

This essentially allows users to invest in their ‘friends’. These social tokens are referred to as keys and allow users access to exclusive content by that ‘friend’, including private chat rooms. While these keys can be used by anyone, they are most often aimed at influencers. As an influencer’s group grows, so will the number of keys. This will in turn increase the base price to be in the group in order to not dilute the price. The platform also offers points to users, though have specified that they have no utility until the official release.

FRIEND-PERP is a perpetual contract released by Aevo as a perpetual contract for the friend.tech index. We hence identify the main two options for investing in friend.tech are:

  • Buying (an) influencer/s’ keys
  • Buying FRIEND-PERP

How does its pricing mechanism work?

The pricing for buying keys has the following code:

Figure 1: friend.tech Pricing Function (friend.tech, n.d.)

where;

Figure 2: friend.tech Pricing (z-axis) against Supply (x-axis) and Amount (y-axis) (Created using Geogebra (https://www.geogebra.org/3d?lang=en)

The buying price will also increase quite significantly, almost exponentially, with the amount and supply, as per Figure 2. However, as of late September, the average price appeared to have peaked, indicating that the exponential pricing may not be a concern. However, this may have been led by the decrease in the number of transactions on the platform.

Figure 3: Friend.Tech Volume and Average Price (ETH) (@cryptokoryo, n.d.)

The selling price is coded as follows:

Figure 4: friend.tech Selling Price Function (friend.tech, n.d.)

This leads to the following graph for the selling price:

Figure 5: friend.tech Selling Price (z-axis) Against Supply (y-axis) and Amount (x-axis) (Created using Geogebra (https://www.geogebra.org/3d?lang=en)

And the following for slippage:

Figure 6: friend.tech Slippage (z-axis) against Supply (x-axis) and Amount (y-axis) (Created using Geogebra (https://www.geogebra.org/3d?lang=en)

Competitive Landscape

  • BitClout: Despite currently lacking the success of friend.tech, BitClout is considered the first decentralised social media site and was quite successful in its heyday. The platform has a similar social token system and also allows users to reward liked posts with money.
    However, concerns grew when users discovered that they were unable to redeem the Bitcoin they had swapped for the platform’s native token. Furthermore, BitClout accounts were made on behalf of Twitter accounts such as Elon Musk without the user having ever signed up for the site, with users hence buying social tokens in a non-existent account.
  • post.tech : Post.tech is a platform somewhat similar to friend.tech that was launched on the Aribitrum network with a current TVL slightly above $250k. Like friend.tech, it allows users to buy social tokens in users, but on top of this, it also allows users to buy and sell tweets and other posts. Furthermore, the platform splits 5% of the total trading volume between the social token holders and the social token creators, as opposed to only giving it to the creators as on friend.tech.

Token Summary

Token: N/A

Market Cap: N/A

FDV: N/A

TVL: $42.5m

Bullish Fundamentals

  1. The platform is more attractive than its predecessor BitClout. It does not have the same concerns about decentralisation and transparency.
  2. Friend.tech has accumulated over $20 million in fees during September alone.
  3. Friend.tech is able to essentially profit off of celebrity and influencer fanbases. Since many notorious names have joined, including an NBA player, the platform may be poised to attract even more celebrities.
  4. While seeing a dip around the end of August that many deemed the end of the hype, transactions were able to recover into the end of Q3.
Figure 8: Friend.Tech Transactions (@cryptokoryo, n.d.)

Bearish Fundamentals

  1. The pricing has two main effects:
    a. Influencers are likely to release far more keys (to increase their price) since 5% of the buying price goes to the influencer. They would be further incentivised if they have keys in themselves already.
    b. The demand and supply (here in the sense of willingness to sell) do not work ‘hand-in-hand’ — essentially as demand decreases, supply will increase exponentially — this makes keys difficult to sell at mass. The increase in price would have been designed to maintain some liquidity, but this exponential relationship could lead to relatively low liquidity especially as shares already start to be sold (hence decreasing demand even further).
  2. The app does not have a privacy policy, simply stating that it is ‘coming soon’. While privacy concerns do not appear evident at the moment or at least have not prevented users from onboarding onto the app, it could be a very bearish factor should there be any future privacy/data issues/leaks.
  3. Many are concerned that the structure of friend.tech is akin to the structure of a pyramid scheme. However, unlike the aforementioned illegal business practice friend.tech does provide buyers with value, but many are concerned about the potential motivations of influencers and early buyers. Many have expressed that they cannot see how influencers could provide significantly more value following a significant price increase (e.g. how there could be much difference in the value that an influencer provides for a $10 key and a $100 key). Moreover, such influencers and their early buyers stand to make more gains as more people buy in. Hence, the emphasis becomes on adding more people, rather than acting as a genuine social network.
  4. Friend.tech announced on the 28th of August that any users moving to “forks and copies” of the platform will be punished by having their points rescinded. Considering that a large marketing push of the platform is how decentralised it is, an automatic forfeit of points for using other platforms could seem very contradictory and turn users away.
    Inflows significantly dropped in the days following this announcement. Particularly with a variety of competitors like post.tech, punishing unloyalty could risk the loss of users to competitors.

Closing Remarks

Friend.tech offers an intriguing concept in the realm of SocialFi platforms, allowing users to invest in their ‘friends’ through the purchase of social tokens or keys. These keys grant access to exclusive content and private chat rooms, primarily targeting users and the respective influencers they follow. The pricing mechanism for these keys is intricate, with buying prices increasing exponentially with supply and amount. While friend.tech presents promising bullish fundamentals, such as substantial fee accumulation and celebrity endorsements, it also faces bearish factors, including concerns about the downside liquidity and potential pyramid-like dynamics.

In comparison to its predecessor BitClout and competitors like post.tech, friend.tech seems to address some decentralisation and transparency concerns, making it an attractive option for users. However, the platform must navigate challenges related to key pricing and liquidity while maintaining its user base’s loyalty and trust, especially in a competitive landscape where alternatives exist.

References

Important notice and disclaimer

This presentation has been prepared by Greythorn Asset Management Pty Ltd (ABN 96 621 995 659) (Greythorn). The information in this presentation should be regarded as general information only rather than investment advice and financial advice. It is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In preparing this document Greythorn did not take into account the investment objectives, financial circumstance or particular needs of any recipient who receives or reads it. Before making any investment decisions, recipients of this presentation should consider their own personal circumstances and seek professional advice from their accountant, lawyer or other professional adviser. This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various assumptions. Greythorn is not obliged to update the information. Those assumptions may or may not prove to be correct. None of Greythorn, its officers, employees, agents, advisers or any other person named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of any forward looking statements or any of the assumptions upon which they are based. Greythorn and its officers, employees, agents and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. None of Greythorn and its officers, employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this presentation. This presentation is the property of Greythorn. By receiving this presentation, the recipient agrees to keep its content confidential and agrees not to copy, supply, disseminate or disclose any information in relation to its content without written consent.

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Greythorn Asset Management
Greythorn Asset Management

Written by Greythorn Asset Management

94 Followers
2 Following

Melbourne-based asset management firm specialising in Cryptocurrency, and Blockchain. Subscribe for our latest industry insights. https://greythorn.com/

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