Web3 app Friend.tech lets influencers literally cash in on their follower counts

Friend.tech, a Web3 app that launched in closed beta earlier this month, has a more direct approach: It allows influencers to sell “keys” to fans who can then message their X (Twitter)-linked accounts directly.

To start using the app, potential “key” buyers must first deposit at least 0.01 Ether. An influencer’s first key costs 0 Ether and prices increase as the number of shares increases—two, 10, 25, etc.—so buyers are strongly incentivized to get in early. For each trade, the app charges a 10% fee—half goes to the influencer, half to the platform—but as key prices increase, so does the pricing model’s spread from which influencers get their fees, meaning that they’re not incentivized to inflate the size of their communities. Talk.Markets founder Lux Moreau broke it down on X:

4/6 The spread of USD value is higher when there are fewer shares outstanding.

It’s important to note that the spread represents profit for the room owner, and it decreases (in %) with each share sold. pic.twitter.com/hazqlOVEuS

— Lux Moreau ✨ (@MentionLux) August 12, 2023

The platform has already attracted big names like gaming influencer Ricky “FaZe Banks” Bengston and NBA player Grayson Allen. Already, top users, including Bengston, have racked up hundreds of thousands of dollars from the platform, Decrypt reported.

Since its Aug. 10 beta launch on Coinbase’s Base layer-2 blockchain, the app has recorded a total volume of $67.4 million over 1.76 million transactions, according to Dune. In the past 24 hours, it has surpassed all but the Etherum blockchain with $1.68 million in fees, according to DeFi Llama.

The app has in recent days garnered support from prominent people in the crypto space including Circle founder Jeremy Allaire and Messari CEO Ryan Selkis.

Funny, I was saying the exact same thing to a group of users on https://t.co/WSmTYFjvaf. That seems like a pretty compelling use case. BusinessSocialFi. https://t.co/K4cH4qJckO

— Jeremy Allaire (@jerallaire) August 21, 2023

But despite its rising popularity, the app is still a work in progress. On the day of its launch, the app went down when it was overloaded with users, according to its page on X, formerly Twitter. It also renamed the social stock offered to followers to “keys,” from “shares,” which it said in a tweet was meant to be a placeholder name.

“We think Keys better illustrates their purpose as in-app items used to unlock your friends’ chatrooms,” Friend.tech tweeted on Monday.

Some have speculated that the name change was an attempt to avoid any complications with the Securities and Exchange Commission, which has recently cracked down on the crypto sector.

lol shares have been renamed to keys

Lawyers had some *words* pic.twitter.com/6xtVrALyOu

— laurence (@functi0nZer0) August 21, 2023

Some on Crypto Twitter have also raised concerns about the app’s business model and approach to privacy. Pseudonymous crypto researcher Ignas said in a Sunday tweet that it could lead to controversial personalities or negative people earning more than others in the space.

Good take.

One thing that bothers me: revenue comes only from trading fees but not from having more shareholders per se.

So controversial personalities might earn more or even creating FUD will be used as a strategy to earn fees.

— Ignas | DeFi Research (@DefiIgnas) August 20, 2023

Another big complaint is that as of Tuesday, Friend.tech did not have a privacy policy available on its website. Instead, it had a placeholder message that said, “Coming soon!” Its team, known by their online aliases of @0xRacer and @shrimppepe, are also anonymous, which has raised concerns. 

The plot thickens: https://t.co/2dt1QUdxEk has
– No privacy policy
– Requires you to register through Google or Apple account
– Can tweet and retweet for you
– Stays connected with your X account until you revoke
– Has no app, thereby avoiding regulatory or internal App Store…

— SuzanneNFTs (@nf_suzanne) August 20, 2023

The app’s rapid rise is a boon for Coinbase’s Base blockchain, which has already seen a pickup in transactions on the chain. Base, a layer-2 blockchain built on Ethereum, launched earlier this month and has been looking to attract users and developers. Coinbase is promoting the chain with a three-week-long campaign called “Onchain Summer,” which includes brand partnerships, NFT mints, and grants to new Base developers.

“We had over 100 dapps live on Base at launch. We’re encouraged to see many builders launching on Base and excited to see the creativity of what developers bring to Base over the upcoming months and years,” a Coinbase spokesperson said in an email to Fortune.

Friend.tech is the latest iteration of crypto developers experimenting with social media, but it may be short lived, according to Columbia Business School professor Omid Malekan. He told Fortune that although the app seems fun and is innovative, nobody has really found the right model for “decentralized social” yet.

“I don’t believe it’s sustainable,” he said, “and the hype is partly an indication of boredom within the industry as prices stall and we await greater regulatory clarity.”