It may be time to put to rest yet another effort to build a social network on a blockchain: The number of transactions on decentralized social network friend.tech has cratered after less than 20 days since its launch.
Friend.tech is trying a new spin on a decentralized social network by letting users tokenize themselves and sell “shares,” now dubbed “keys,” to fans and followers. People who buy these shares then become “shareholders” and can engage with the creator directly.
While many rushed to sign up like it was the next gold mine as big name crypto influencers, NBA players and OnlyFans creators jumped onto the platform, others were more cautious and skeptical because the app needed you to deposit funds when signing up, lacked a clear privacy policy, and had a pretty foggy roadmap. Now it appears the people who hesitated on betting their net worth on others’ may be the ones to come out on top.
Activity on the app, running as an invite-only public beta since August 10, declined 95% from a peak of almost 39,000 daily transactions on August 21 to about 1,400 at the time of writing, according to Dune Analytics data from user cryptokoryo.
Just seven days ago, I wondered if friend.tech’s early growth would be sustainable, and we can see that the answer is clearly no.
Besides declining transactions, the inflow of funds on the protocol has also tumbled from $1.98 million at its peak on August 20 to about $8,300 today. Still, the app has recorded inflow of about $81 million in total, which isn’t insignificant for a platform this new.
To be fair, it isn’t uncommon to see declining user engagement after launch: Social media platforms Bluesky and Threads gained ample early traction only to see the hubbub fade in the following weeks and months.
So while we should acknowledge that growth isn’t linear at any startup or company, the data we have indicates that the social service could be the latest iteration of a crypto project growing fast and crashing even faster.
To be clear, this isn’t the first time a crypto project has tried to tokenize people. BitClout (later renamed DeSo) tried to build a decentralized social network where you could buy and sell tokens based on people’s reputations. But it failed to gain significant, long-term traction after people took issue with the company onboarding them onto its platform without their permission.
It’s also worth noting that friend.tech was built on Base, the layer-2 blockchain from Coinbase that launched earlier this month. Base has become a hot spot for new decentralized applications (dApps) and memecoins, like BALD, which also surged in popularity only to plummet later.
The BALD token’s exponential growth didn’t come as a surprise for Jesse Pollak, formerly known as lead for Base and head of protocols at Coinbase, and now dubbed the creator of Base.
“My first reaction was, ‘This is crypto; of course this is happening,’” Pollak told me on TechCrunch’s Chain Reaction podcast earlier this month. “Was this in our plans? Absolutely not. We’ve been focused on builders and that’s who we remain focused on . . . but because Base is an open, permissionless ecosystem, you’re going to see people build all sorts of things. And that’s OK; that’s the beauty of crypto.”
The biggest question right now is: What would it take to sustain a crypto-based social app?
Perhaps the speculative nature of being able to tokenize your peers and influencers was a red flag to begin with for friend.tech, but let’s face it, a lot of the crypto community is often drawn into projects due to their potential for making money. On friend.tech, the majority of traders have sold more shares than they purchased, signaling that the trend is skewing toward liquidating positions instead of holding on to them, per Dune Analytics data.
It’s going to be interesting to see what kind of blockchain-based social networks will succeed, if any, and if financial incentives will have a role to play. Perhaps the decentralized social network of the future will be one that does not depend on speculation as a core mechanic.