My initial analysis of the Friend.Tech protocol a month ago was pretty biased.
This makes more sense than not. As a social media protocol, Friend.Tech is a perceived competitor to Hive. I was doing my best to ignore it because it was probably trash, and then when I actually looked into it there were half a dozen red flags that essentially confirmed that I was correct in that assessment.
A week later Friend.Tech was declared dead after volume had completely dropped off a cliff (95% loss) and I was feeling pretty vindicated. I declared victory over Friend.Tech and was ready to move on to the next shiny new thing that crypto has to offer.
However, a lot of the people I follow on Twitter that have no affiliation with the Hive Swarm still seem to talk about Friend.Tech on a daily basis. What gives with that? Why haven't they given up and moved on already? Perhaps there was something that I missed, so I decided today that I'd look into it a bit more.
So what's good about Friend.Tech?
Why are people sticking around? Looking back on my original post I notice a glaring omission: I didn't even explain how the platform works. My only focus was to point out why it won't work.
Getting started
The first thing one needs to signup with Friend.Tech is ETH (presumably for gas fees and buying keys). This ETH exists in a wrapped form on Coinbase's new layer 2 EVM called Base. I don't know exactly how this is done, but I have a pretty good guess: just send ETH to a wrapping bridge (this might be available directly on Coinbase) like https://bridge.base.org/deposit and then connect Metamask to a Base node in order to access the chain. Pretty standard stuff which is why EVM can be so convenient in the first place.
I mentioned in my last post that Coinbase Wrapped Staked ETH (CBETH) is #100 on the market cap and already has x3 Hive's total market cap stored within. Friend.Tech likely has a lot to do with that, even though I wasn't realizing it yesterday during the report.
In any case once someone has ETH wrapped inside of the Base EVM they can use it to buy "keys". Keys used to be called "shares" last month, but they seem to have rebranded the title in an attempt to make them sound like they aren't securities. Will the SEC see it that way? Ha, yes, well, we know that Gary Gensler doesn't really care about pesky things like 'the law' and 'playing by their own rules'.
Securities
The CEO of Coinbase, Brian Armstrong, has had enough of the SEC's bullshit. Coinbase has done nothing but bend over backwards to follow all the rules set forth by the law, and now they are ready for war. After the Ripple victory in court it's almost guaranteed that Coinbase will win considering they don't even have their own token (for this exact reason).
The SEC will undoubtedly eventually try to say that Friend.Tech keys are securities and every user on the platform is violating the law. After all these keys can easily be interpreted as an investment contract designed to lure in outside capital. There's a couple reasons why this argument falls flat on its face.
Utility
When first investigating Friend.Tech I did not realize that it is seemingly an extension of the Twitter social network. Obviously this is why non-Hivers on Twitter are still tinkering around with it. Owning one or more of someone else's keys on FT will give a user access to private chatrooms associated with that account and any premium content that account is providing behind the paywall. It's actually not a terrible idea, even though it's not necessarily one that I personally agree within the context of WEB3 and open-access.
In fact 
Touchback to Soul Shards
Way back in olden day I had an idea that was similarly adjacent to what FT has created today. The concept was to give every account on Hive a "soul". Basically every account on Hive would become its own currency, and that currency could act as a reputation system or a loan network or a handful of other use-cases. I now realize that Friend.Tech has made some significant improvements to this idea and forces me to refactor the concept to incorporate these upgrades.
Separation of user from the premine.
One very cool thing that FT has accomplished is taking power away from the entity minting the token. I'm still trying to figure out how it works (someone on YouTube mentioned something about a "quadratic formula") but the gist of it is that users aren't allowed to create keys/shares out of thin air... even though the amount of keys in circulation is theoretically infinite.
This is accomplished by keys having a value that is determined by previous purchases and sales. A new account might only have keys that cost $1 to buy, but if a bunch of people start buying keys all that money gets locked into a contract and the algorithm will boost the value of that keys account, using the money inside the contract as liquidity when someone sells.
This is a very interesting and novel way of doing it because it provides a certain level of abstraction that separates the user from their own keys and even manages to separate the buyers of the keys from the sellers.
You do not buy or sell keys to other users like you would in any kind of traditional market. Rather you buy and sell keys to the contract that manages that particular account. That's actually pretty cool, as I have found it's much more sustainable to use the platform itself as a middleman rather than relying on P2P transactions to provide liquidity (like giving oneself a DAI loan on MakerDAO rather than trying to get a loan from a random entity).
Bonding curve
I've finally found a good explanation as to how the price of keys are calcualted.
The buying price of ETH = n ^ 2 /16000 (where n is the total outstanding supply, and 16000 is the scaling factor or constant selected by Friend.tech’s economic model.
Selling price of ETH = (n-1) ^ 2 /16000
Based on the equations, the difference between the buying and selling prices of shares should increase over time. However, the spread rate, which is equal to the (buy-sell/ selling price) x 100, should decrease. So when friend.tech grows, the spread rate will reduce, and only people with large accounts — more outstanding shares — will be better positioned to make profits.
lol
Yeah so on top of the ridiculous 5% fee that goes straight to the devs, users turn a profit based on this spread, which is around half a percent at the moment if that one account I'm following on Twitter is to be believed. Apparently as the platform grows this half a percent profit will get even smaller. It's unclear if they plan to decrease the absurd 5% fee that will almost certainly screech the network to a grinding deflationary halt.
The way I would go about implementing such a thing is a little different. I think about this problem in a slightly different way because it works in a very similar fashion to automated market makers. Basically every account gets their own token, and then that token is paired to the main governance asset of the platform. In this case it's paired to wrapped ETH but on Hive it would be paired to either Hive or HBD (or both).
Probably smarter to use HBD in a situation like this to anchor the value to a unit of account and make it less volatile. In addition, lots of HBD locked in a system like this would likely ironically be even better for Hive than storing native Hive within the contract. This is due to the fact that Hive would have to be burned to create that much HBD in the first place. Creating demand for debt derivatives is just as good (if not better) than creating demand for the collateral it's derived from.
Centralized threat vectors
- Coinbase
Coinbase and Base are essentially centralized KYC/AML dumpster fires. Simply the fact that Friend.Tech has been build atop such shaky ground is reason enough not to fool with it. In addition, Base L2 fees may be quite small, but they still exist, which is a terrible way to run a social media site. Nobody wants that. - Twitter
Because we can think of FT as an extension of Twitter this bakes an extra layer of insecurity directly into the protocol. What happens if Musk just decides he's going to make it impossible for the FT network to connect to the Twitter API? Game over. Again, systemic threats like this do not exist on real decentralized networks like Hive. It's like putting an NFT on a centralized server and expecting it to be accessible until the end of time. Good luck with that.
Premining keys
While an account can't directly premine their own keys they can certainly buy their own keys before anyone else does, which in turn would drive up the price and allow them to dump that premine back on unsuspecting buyers. In fact premine bots were set up immediately to do this for new accounts, especially new accounts that have a lot of followers on Twitter. Obviously FT could use some kind of fair-launch technology that prevents bots from sniping keys like this with the intention of scalping them for a profit later.
Conclusion
My knee-jerk reaction to Friend.Tech blinded me into looking at all the reasons it was doomed to fail rather than looking for any kind of redeeming qualities. There are a few cool things that FT is doing that should not be ignored.
Luckily when a project has staying power it cannot be ignored forever. Do I think Friend.Tech has staying power? Of course not, but it at least had enough for me to give it a second look, and I'm glad that I did.