Blink and you’ll probably miss the latest crypto fad.

A hot new social-media project that enlivened an otherwise dull summer for digital-asset traders is already beginning to fizzle out, after reaching a peak that at one point made it the highest-earning service provider in decentralized finance.

It’s called friend.tech, a blockchain-based platform that allows users to buy and sell digital tokens linked to their favorite influencers on X (formerly Twitter), which act as a gateway to communicate with other backers in dedicated group chats. Early creators on the platform include crypto personalities like Cobie and HsakaTrades, as well as Milwaukee Bucks basketball player Grayson Allen and Y Combinator CEO Garry Tan.

Less than two weeks after its Aug. 10 debut, fees on friend.tech — where 10% of every token purchase or sale gets split between the influencer and the platform — rose to a high of almost $1.7 million, according to data from DeFiLlama. That height, reached on Tuesday, made friend.tech the highest-earning platform after the Ethereum blockchain itself at one point, with the app generating around $7.5 million in fees since its launch as of Friday, per a Dune Analytics dashboard tracked by crypto asset manager 21.co.

But as quickly as its rise began, the hype soon diminished. Fees began to droop, and were nearly 70% lower by Friday compared to Tuesday’s peak. The number of new users joining the platform daily also tanked, falling from 20,360 new accounts on Monday to just 4,484 on Friday — a decrease of almost 80%. The precise cause of friend.tech’s fading star is not yet known, though a report from crypto research firm Messari noted user gripes regarding “high trading fees, slow load times and a steep pricing curve” which determines how tokens on friend.tech are valued.

The premise of friend.tech relies on the outsize role that personalities on platforms like X play in the success or failure of new crypto startups, making them an appealing target for monetization. Social media is also a hotly contested area of development in crypto, with the likes of Aave’s Lens Protocol and Twitter co-founder Jack Dorsey’s BlueSky among those to have launched in the last year.

Read more: Crypto Wants to Save Social Media

But so far, friend.tech has turned out to be subject to the same speculative mania that often tails new crypto projects, making it more like Dogecoin than a vibrant social-media platform. Even venture capitalists are wondering whether every idea requires a level of speculation in order to be successful in the current market.

“The nature of crypto bakes ownership in as a feature. It’s an alternative to the advertising model that drove the tech giants,” Simon Taylor, head of strategy at fraud prevention startup Sardine, said in a message. “The upside is more privacy and potentially a share in growth. The risk is speculative games.”

Teething Problems

Friend.tech runs on Coinbase’s new blockchain network Base, with its early runaway success representing a rare bright spot on a chain that’s been flooded by token scams since its launch. The dramatic spike in activity, mostly generated by automated trading bots seeking to capitalize on friend.tech’s meteoric rise, also juiced Base’s transactions per second to briefly surpass that of Ethereum.

The app has also begun to attract creators from platforms such as OnlyFans, a subscription-based service which similarly permits access to private group chats as well as exclusive content. But even in its short life, friend.tech is already experiencing problems.

Influencer tokens, originally called “shares,” were renamed by friend.tech’s developers on Monday as “keys” — a move that was likely an attempt to distance them from securities rules after eagle-eyed lawyers noted the possible overlap with US regulators’ current crackdown on such assets. Criticism has also mounted from traders over friend.tech’s lack of a privacy policy — a core requirement for any platform in the modern era.

And those same bots that drove the spike in transactions on friend.tech are contributing most to the platform’s subsequent downturn, according to 21.co’s Tom Wan. Automated bots can manipulate the order in which a transaction happens, so when an influencer tries to make their first key, bots are able to get ahead and buy it before them at the cheapest price possible. Creators are then left to buy their key at a higher price on the market, disincentivizing them in the process. The same can happen in the secondary market, forcing legitimate users to have to pay a higher fee to acquire the same stake.

Track Record

Some have likened friend.tech’s model — where its underlying structure of only providing creators with a cut of token transactions means they don’t have much incentive to stick around past the initial sale — to nonfungible tokens. NFTs themselves have a poor track record in this regard, with one of their main selling points — the ability for creators to earn ongoing royalties long after the first sale — largely failing to materialize and, in some cases, being slashed or blocked altogether. Overall, NFT sales at the start of this month were down more than 95% since the sector’s January 2022 peak at $288 million, per CryptoSlam data.

The idea of tokenizing famous crypto personalities and allowing users to buy shares in them is nothing new, either. An Andreessen Horowitz and Sequoia-backed platform known as BitClout attempted a similar endeavor in 2021, quickly racking up almost $170 million worth of Bitcoin from investors and users after reserving thousands of accounts for influencers in advance. It soon encountered legal backlash after one of those influencers disputed BitClout’s use of their information without consent, and the company later underwent its own rebrand.

Ultimately, friend.tech’s main problem goes to the heart of what’s been crypto’s top problem all along: providing a utility that encourages user stickiness beyond the ability to speculate. Already, others are developing tools on top of friend.tech to help game that financial system: tips on how to pick out the next biggest riser, a trader leaderboard and token price charts.

“In its current form, you’re basically looking at an unintended Ponzi with first in/first out because there isn’t any product feature depth to create stickiness or retention,” said Ryan Wyatt, former president of Polygon Labs, in a post on X.

“There is undoubtedly interesting social [and] crypto loops to explore here,” he added. “But call a spade a spade, we know how these things play out in the absence of a sticky product with real value.”

If the platform can’t find a way to encourage those who aren’t crypto natives to find some benefit from the service, then it’s likely to go the same way as everything else in this industry once a newer, shinier novelty comes along — into the ether.

--With assistance from Philip Brian Tabuas.