Letter 48: FriendTech (3,3)
Past, Present, and Predictions
FriendTech is the talk of the town (square), and you’d be hard pressed to be paying any sort of attention to the crypto space and not be bombarded with FT this, (3,3) that, and all sorts of other chatter regarding the latest craze in this space.
Most people are not degenerate gamblers that spend their lives glued to their phones during the depths of the bear so I’ll forgive you if you have no idea what the hubbub is all about - that’s what i’m here for.
This is a behemoth of a post so make a coffee and settle in for a long read.
What is FriendTech?
FriendTech (or FT) is known by many names:
Decentralized Social (DeSo)
Social Finance (SoFi)
Tokenized Chatrooms
“The marketplace for your friends”
Whatever you want to call it, it’s basically a new application built on top of the Base blockchain. It allows users to create an account that is linked to their Twitter (X) account, and then sell shares or “keys” to access a private group chat with them.
One (albeit optimistic) definition I quite liked while researching this post is one by @EmilyLuvsCrypto, where she states that the Northstar for FriendTech is “monetizing creators through forming authentic relationships”.
How does it work?
I’m not going to write up a practical “getting started” guide since there are already so many of those out there (I’ll link to one in the resources section at the end), but at a high level:
Users can buy keys to gain access to a private chat room of the person they buy the key from. If you buy one of my keys, you’ll get access to a chat room where you can chat with me. Importantly, you do not get to see all the chat from everyone else who has a key. You might get some insight into what others are saying by the room-owner’s responses (you can quote-reply). This distinction allows for a more curated chat room experience where the owner can ensure there’s high signal-to-noise if they want.
There’s some intrinsic value in this. Many people are willing to pay money to have access to others. As an extreme example, imagine if Taylor Swift was on FT and was actively chatting in a chat room. There’d be about eleventy bazillion people on earth that would want to be part of that room, and would want to pay good money for the access.
As a less extreme example, one of the most popular, prolific, and imo smartest Crypto Twitter accounts, Cobie, decided to mostly stop tweeting earlier this year. People value his thoughts. He is now one of the most popular accounts on FriendTech, entirely unsurprisingly.
How much do keys cost?
Ah, this is where things begin to get interesting. The pricing model for keys is based on a bonding curve. Contrary to popular belief, a bonding curve is not simply the name for when the price goes up as more of a thing gets minted, as was popularized in early 2021 by NFT projects (they would increase the price every X mints, in what is generally referred to as a “FOMO ramp”.)
A true bonding curve is one where the price goes up as the supply increases, but also goes down as the price decreases, and, importantly, allows for holders to instantly receive liquidity by selling back to the curve.
It is not a bonding curve if you can’t instantly sell your token (or whatever thing) and get your money back (or most of your money back, as we’ll come to see).
This is an excellent thread by Cygaar on how the pricing model works:
A simple explanation of how @friendtech share pricing works (and other fun facts about friend tech's contract) 🧵:
The TLDR for the math nerds and the curious: key price = supply^2 / 16000.
There’s one giant caveat to be made here: every time someone buys or sells a key, there is a 10% tax. Half of this goes to the account the keys of the room belong to, and the other half goes to the FT protocol.
This is a hefty, hefty, tax. It’s great for creators and people who have their own room, and it’s great for the protocol. It’s not so great for people who are trying to trade keys or treating keys as investment instruments.
Why is it exploding in popularity so much?
Several reasons:
There is heavy airdrop speculation, with “points” being rewarded every Friday that people are farming. Estimated airdrop date is still 4-5 months away.
Basically any large influencer on Twitter is able to create an account and instantly make money, so of course they love it. They then tweet about it, and all of a sudden if all the influencers are talking about it, everyone is hearing about it. Funny how that works.
A lot of smaller accounts are also able to make money from FT. Creators who are engaging with their key holders in interesting ways and providing value of some sort have seen their keys rise and profits flow their way too. This is great to see.
Most people seem to be re-investing their trading fee profits into buying other people’s keys (or buying back their own). As the fees get pumped back into the ecosystem, key prices across the board tend to rise. People LOVE when number go up!
There’s this whole (3,3) meme that is adding rocket fuel to the fire (more on this soon).
It’s genuinely fun. If you’re a social critter, and you’re inclined to like making money, then boy oh boy, is this a great platform for you!
Crypto tends to attract people with a high risk tolerance and a propensity to gamble. Nothing like a good airdrop, some ponzinomics, and the regular dopamine hits of watching ETH flow into your account as people buy and sell your shares to really get the blood flowing.
It’s a bear market and people are bored and this is something to do. I don’t think FT does this well if this was launched during peak bull.
It appears that FT might proliferate beyond our crypto bubble and attract people from other walks of life. Largely hopium, but we’ve seen a bit of this, and it breeds excitement.
Phew. That was way more points than I set out to create, but there’s a lot of reasons people are loving FT lately. Oh did I mention the airdrop? Yes I did, but it’s worth mentioning twice. There’s a tonne of airdrop farming and speculation going on, which leads to (3,3), which leads to number going up, which leads to fun and excitement, which creates an epic flywheel greased with greed.
Okay what the hell is 3,3 [TRIGGER WARNING]?
The trigger warning is for me. I’m still triggered, or scarred. At least I learned my lesson and still remember.
You see, (3,3) is a meme that popped up in 2021. It was born out of the OlympusDAO protocol (also known as OHM).
OHM was (and still is) attempting to become “the future decentralized reserve currency”. It’s ambitious as heck, and tbh, actually seems like it might be working. Boy has there been a hell of a road to get here, though.
When OHM launched, they had an insane amount of token emissions that were distributed to those who staked OHM tokens. There was a clever reason for this, i’m sure, but it also lead to some insanity (such as > 100,000% APY), and the (3,3) meme.
Someone decided to try and apply game theory to the concept of staking OHM, vs selling OHM, vs utilizing their bonds. You can see it in full detail here:
https://www.treehouse.finance/treehouse-academy/olympusdao-and-33
Clearly, the best course of action, is if everyone stakes and never sells! It actually does make sense in a purely theoretical sense and that might have been it’s greatest downfall. A bunch of people who thought they were smart (I am talking to myself here) bought into it and overlooked the practical and human-nature element of it all, not to mention the ridiculous common sense element.
When the market as a whole started to crash, OHM plummeted in spectacular fashion.
It dropped from $1300 to $30 in about 5 months, and is currently sitting at $11 being down 99.2% from it’s ATH*
*it’s worth noting that people who (3,3)’d from day 1 (or close to it) are still up a lot, because while the price of OHM has collapsed, the quantity held due to the crazy emissions would have more than made up for it.
Nonetheless. A calamitous crash and a lot of people got very rekt.
During almost the entirety of 2021, it was popular to go around propagating the (3,3) meme.
There was a period where I even had it in my Twitter name. My account was always Zeneca_33 (b/c I was 33 years old at the time I created it), but I changed it to Zeneca (3,3) for a while as I bought into the OHM meme and narrative and game theory and thought it was fun and exciting and number was going up and life was great! Until it wasn’t.
What on earth does this have to do with Friend Tech? Well, basically, the 3,3 meme has popped up again in the context of FT. Instead of staking OHM though, the idea is to “swap buys” with someone. You buy their key, they buy your key, and you both hold.
It’s fun and cute and a meme and there’s a lot more fun and memeyness behind it as well, if you check out this thread by 0xBreadGuy.
And I am sure it will work! Until it doesn’t. Maybe, even, it will work forever. I can’t predict the future and in a game theoretically perfect world, perhaps it is sustainable. Perhaps you can 3,3 for a while and then transition out to something else without anyone getting too rekt. Perhaps everyone today is gonna make it, but it’s the next million users that will be left holding the bags. That’s a win, right? Perhaps, perhaps, perhaps.
When you see me, and others, preach caution and weariness when everyone is touting how great (3,3) is… there is valid reason. There were people yelling at me (and everyone else) in 2021 how ridiculous we were being, but it’s amazing how greed and number-go-up can deafen your ears to sane voices.
I hope I am being that sane voice today, and I hope some people listen and take a bit of caution. FT is of course not the same as OHM, but the (3,3) meme hits a little too close to home to not draw these parallels.
It’s worth remembering that OHM is still relevant, and has fundamental value, just like FT might. The argument that “oh this is different because of the airdrop, or because there’s product market fit” is not a good argument imo. Also a good time to remind people of this banger:
I can’t tell you what will happen, and I can’t tell you what to do. I can, however, tell you what has happened. History might not repeat, but it sure as hell does rhyme, and you know what, it really does repeat in many ways.
Some redeeming factors
After I (hopefully, and imo rightfully) just scared the bajeezus out of you with a walk down memohmery lane, let’s take a look at some of the positives with respect to FriendTech.
It’s innovative (kinda). Decentralized Social isn’t new, nor is adding a Financial layer (Bitclout is a 2021 example), but building it on top of an L2 and the exact implementation of FT is novel.
The onboarding process is not bad for non crypto users, with the ability to fairly seamlessly deposit with a credit card. And it’s pretty good for crypto natives as well - once you bridge to Base, it’s almost entirely gas free, and rewards are in ETH (and not some other token that you would then need to sell/convert for ETH or stables).
It’s bringing.. royalties back? And rewarding creators? This is the big one to me. Royalties for creators were such a huge part of the appeal of releasing NFTs in 2021 and with them all-but disappearing over the last 12 months, it’s kinda nice to see creators able to find new avenues to making some money.
Expanding on #3, I came across this wonderful article by William Murphy on how they, as an artist, are experimenting with FT as a way to interact with their collectors and use the trading fees as a way to pay for the art they create and gift back to their holders via raffles.
A lot of people are experimenting with different types of “utility” and engagement. Some whales like Pranksy and Dingaling are raffling off valuable NFTs to people in their chat. Others are treating it like an alpha chat and sharing what they believe is valuable info to their group. I’ve seen people give out personalized health & fitness advice, run meditation sessions for their rooms, generate puns-for-holders, and many more creative ideas (and non-nefarious, non-speculative ones).
I’m personally treating it as an open question-asking room if anyone wants to ask me things, and occasionally sharing random thoughts. Maybe i’ll try some other things, maybe I won’t, it’s all an experiment still at this stage.
This brings us to another important question though..
How does Friend Tech fit into existing token-gated ecosystems?
This is an excellent question that i’ve had people ask me, and ask of others. If you already have an “alpha group”, or some other token-gated community (or even a non-token gated community but gated by a monthly subscription or something), how do you balance FT with everything else?
Well.. the only answer is “it depends”. It’s gonna be different for everyone. There is no single right answer here.
It comes down to what you want to do, and what you think is fair and reasonable, and hopefully, in the best interests of everyone that has previously supported you as well as those that are currently supporting you. It’s tough to balance, no doubt.
One of the difficulties and almost unfair elements in all of this is the landscape of royalties vs fees from FT key sales. Using myself as an example, I’ll be completely honest and say that when I launched ZenAcademy and The 333 Club back in 2021 it was under the (perhaps naive) impression that the model was sustainable due to ongoing royalty revenue. With those all-but disappearing, it has been difficult (to say the least) to keep the lights on and everything running as they once did. We’re managing, but it’s tough.
With Friend Tech, all of a sudden there’s meaningful revenue once again coming in for engaging with people that seemingly want to engage with me. I say seemingly because it’s pretty impossible to actually discern who wants to pay what to be part of a chat, and who is speculating. The lines are very blurred.
One of the reasons FriendTech has taken over your feed: total fees paid to "creators" in the past 10 days:
FriendTech: 4,090 ETH
All ETH NFTs: 610 ETH
(Giancarlo made a good point in the comments that we should also include funds raised via mints for creators, which was about 2300 ETH over the last week).
I will also say that the same “issues” with royalties apply to FT keys: the revenue is dependent on turnover/volume and not in having loyal holders, and the insane volatility makes it difficult to plan for anything.
To me, a simple monthly subscription model would still be superior. No crypto necessary, no token necessary. Still, it’s interesting to experiment and there might be a viable future where this all makes sense and works out for creators and those wanting to engage with creators.
If I could do it over again, knowing what I know now and how the space would play out, I would not have launched NFTs as membership tokens - I would have simply set up a monthly subscription fee. So simple, so brilliant, so sustainable.
That said, I don’t regret doing what I did - it’s been a fascinating learning experience and I am still committed to providing all the value I can for my holders. I am also glad I made very tempered promises from day 1.
I think the most important concept for membership and community based NFTs also applies to FT rooms: expectation management.
Expectations from key holders
Ultimately, you cannot control why someone might buy your key, or token, or what they might want or hope for from their purchase. That is their decision and they will make it for their own reasons (ie to airdrop farm, to speculate, to support you, to gain access and insights, to enter raffles you might offer, or any of many other possible reasons).
What you can do, though, is not say one thing and then do another. You can not lead people on. You can not make unrealistic promises with the goal of trying to get people to buy your keys. That’s just a shitty thing to do. Unfortunately, it’s also all-too-common in our space.
For me, this is what I promise my key holders:
Ultimately, nothing. This is all highly experimental. I may stop posting in my room in the future, there is no promise or guarantee that I will maintain a FT chatroom from now until the end of time.
While I promise nothing, I will try to be moderately active in my chat and answer questions. I will probably share random thoughts from time to time. You can call it alpha, or half-baked ideas, or whatever. To me, it’ll just be random thoughts I feel like sharing somewhere but that aren’t fleshed out enough for Twitter.
I make no promises to buy the keys of anyone who owns one of mine. I own a bunch of keys from people who own mine, but I also make no promises to never sell. I’d rather be honest and up front than tell you one thing and then do another.
And that’s about it.
I’m not promising raffles, I’m not promising lifetime access to anything, I’m not promising video calls. If you remove the speculative element, and the airdrop farming element, it is hard to imagine access to my room being worth $1000 (the approximate value of my key right now).
That said… you can’t exactly separate one from the other. Especially when you introduce the bonding curve, and the ability for someone to instantly sell a key back.
Is it really spending $1000? Yes and no. You could buy my key, hang out for a few hours, ask some questions, and then sell it and almost certainly get around 90% of your money back.
Is it worth $100 for someone to do that? I don’t know, that’s what the free market is for. Based on what I charge for consulting and other services, it seems quite reasonably priced.
A person could do the same with one of my 333 Club tokens, a community I created to give people direct access to me and each other. With those, however, I no longer receive any royalties. It is quite difficult to sustain lifetime value with no ongoing revenue, but, I gave my word and I will stick to it. I’ll figure out alternative ways to provide value to my 333 club holders, for as long as I can, which is probably for as long as i’m alive.
It’s a different promise to those who bought one of those tokens vs someone who has bought one of my FT keys.
If you really value access to me, and that alone, I genuinely would suggest picking up a 333 club pass.
Are keys securities?
I AM NOT A LAWYER SO TAKE THIS WITH AN ENORMOUS GRAIN OF SALT AND ALWAYS SEEK YOUR OWN LEGAL ADVICE, AS WELL AS FINANCIAL AND TAX AND ALL SORTS OF OTHER ADVICE.
The topic of securities has been relevant in our space for a long time, but it’s heated up a lot over the last couple of months with the SEC handing out fines to both Impact Theory and Stoner Cats.
My laymen’s perspective is that not all keys are created equal, similar to NFTs. Many are probably securities, but it is very possible to imagine keys not being securities as well.
This is a good read on this exact topic, by an actual lawyer, Carlo D’Angelo.
On Mental Health
Thanks to Melissa Burr for calling this important point out:
I'd like to see you have a small section about the potential effects on people's mental health.
It's one thing to feel "worthless" but to see your "value" race to zero in real time, is a different kind of struggle.
I'm intrigued by the social experiment, but I think we can… twitter.com/i/web/status/1…
It’s a weird new world we live in. Social media is awful for the exact reason that it creates an environment where we are constantly comparing our worst to everyone else’s best. We see the entirety of ourselves, but most people only share the best version of themselves.
Self-worth is tricky enough in the social media world where people are chasing likes and views and impressions and engagement and the dopamine hits can be highlights of the day and the lack of them can be the lowlights.
This is only further exacerbated when you add literal monetary value on your profile into the equation. You’re basically selling shares in yourself, and the market gets to decide what they’re worth.
It’s a total double edged sword (just like social media). I’m not here to try and claim whether it’s good or bad, or a net positive or negative for humanity. It is a thing that exists and I doubt we’re ever putting the genie back in the bottle (both for social media, and the tokenization of creators).
It can have a monumentally positive effect on a person and create all sorts of confidence and positive self-worth if they create an environment in which they’re surrounded by people who appreciate them and see their value.
It can have the opposite effect if they try to do that, and fail, and see others around them succeeding where they failed.
I do think is a net negative to conflate “worth” and “value” with “financial worth” and “financial value”.
Some of the best and brightest and kindest and most successful humans in the world have no social media presence.
Some of the best and brightest and kindest and most successful humans in the world will have Friend Tech keys worth near-zero, but that doesn’t make them worth near-zero.
On the risks, and generational wealth
What is somebody risking by getting involved? or perhaps, what are the risks of getting involved?
am i missing out on generational wealth (again) or is it wise to be wary?
The risks of getting involved are quite easy to break down:
You risk losing all of the money you put into the platform (either by everything going to zero, or due to smart contract risk / a bug / exploit)
You risk wasting time on the app with little to nothing to show for it
You risk damaging your reputation, depending on how you approach it
You risk having your Twitter account compromised if you don’t appropriately disable the permissions you must grant to access the app in the first place
You risk having your personal info leaked because, up until like 10 days ago, there wasn’t even a privacy policy for Friend Tech. I don’t have particularly high confidence that they’re treating any private user info with the best regard
Those are some serious risks, but clearly not enough to mitigate the widespread adoption of the app. Like I said earlier, we crypto degens tend to be a breed with an extraordinarily high risk tolerance, and a propensity to gamboool (not all, ofc, but enough).
It is certainly wise to be wary.
Are you missing out on generational wealth? Well, I have good news and bad news here. If there is generational wealth to be had, you’ve already missed out on it*
It’s hard to make generational wealth when there are 200,000 users, 99% of whom are also chasing generational wealth.
*maybe some small exceptions, but it’s not the kind of “easy” generational wealth everyone seems to want by being so early to something you just get a 1000x without having to work hard.
What do I think is gonna happen?
The only real answer, of course, is that I don’t know. Nobody does, and if someone tries to tell you with any sort of certainty that they know how things are gonna play out.. run, run far little one, and never listen to that person.
At best we can make predictions based on weighted probabilities and hope for the best.
I’m not even going to go so far as to assign probabilities to anything, but I will share some thoughts on how I think we see things playing out:
(3,3) will continue until it doesn’t. Currently there is a stigma against breaking the (3,3), and people don’t want to sell the key of someone they promised to buy and hold. The platform is still growing and (3,3) is still working.
It will stop at some point and the winners will be the ones who sense it coming and sell first, and the losers will be the ones bagholding all the way down, hoping for a recovery.
There might actually be a drop + recovery (or even multiple of these), but eventually, everything will drop monstrously (90%+)
The tricky part is.. nobody knows when that is, and with an airdrop 4-5 months away.. things could get very crazy before they get un-crazy. Or everything could crash tomorrow. Therein lies the fun of it all.
I think there will also be FT-fatigue soon. It’s already difficult to be active in a lot of rooms. FT was fun when you held a few keys from friends and people you liked and wanted to support, and you’d hang out in their rooms and they’d hang out in yours.
Kinda like Discords in the early NFT days. There weren’t many, and lots of people hung around in a smaller number of servers.
Then we got a million different NFT communities, and servers, and it became impossible for people to keep up with everything going on.
The same thing is gonna happen with FT, I believe. I feel it myself, have heard others talking about it, and.. it’s just common sense. History rhymes.
Friend Tech might “make it” long term. It really might. There’s something novel, fun, interesting, profitable, engaging, and rewarding about the entire experience.
The deck is heavily stacked against it, though, and it is again my opinion that almost certainly the prices of almost everything are going to drop significantly.
The questions you should ask are:
Is it sustainable?
Is it better than web2 options?
Is the fun and excitement and engagement going to be there when the airdrop farming goes away?
When prices go down?
You can think and answer those yourself.
My personal strategy is going to be to have fun while it lasts, engage with the people in my room for as long as people want to hang out in there with me, and treat the whole thing like an interesting experiment and learning experience.
Even if FT doesn’t work out, I think it is a really great step in the direction of creating a DeSo / SoFi ecosystem that rewards creators. We are living in the creator economy after all.
The hope though is that these ecosystems are better than a plain and simple $20/month subscription. I think the use of a bonding curve is actually a significant improvement because it allows the market to set the price — but.. once the price is set, if there is no airdrop farming, and no speculation, and little to no volume.. creators stop getting paid, and then what is the incentive to continue engaging?
Food for fork, sorry, thought.
Resources / Further Reading
An Excellent Thread of Threads on FT
How to protect your keys from getting sniped by bots
Today’s FT Stats from Tyler_Did_it
Post by NFTstats about how FT volume > ETH NFT volume for 6 days
Some FriendTech Invite codes (single use only):
ft-uswet84bft-2llsocu0ft-ds0z5a14ft-f8x643sn
Third party apps (just a few of many)
FrenFren ← dashboard for user discovery and asset management
xFriend ←trade keys & analyze friend tech data directly from 𝕏
FrenTech95 ← win 95 based charts + more
FriendMex ← charts and recent trades
Friendswap ← more charts and analytics
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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. I’m not a financial adviser. These are only my own opinions and ideas. You should always consult with a professional/licensed financial adviser before trading or investing in any cryptocurrency related product.