Bankless - Is friend.tech Good or Evil?

Episode Date: August 24, 2023

Friend.tech has dominated the crypto landscape as of late and it’s now breaking out into multiple mainstream non-crypto audiences. Should we pat ourselves on the back? Or do we need to more carefully reflect on the consequences of this new financialized social application?  Ryan and David give their raw thoughts on these questions and much more.  ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ------ 📣 SAFE CORE | Smart Wallet Infrastructure https://safe.global/core ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  ⁠ 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ⁠ 🦄UNISWAP | ON-CHAIN MARKETPLACE ⁠https://bankless.cc/uniswap  👾STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader  ----- TIMESTAMPS & RESOURCES 0:00 Intro 5:28 RSA’s survey  https://twitter.com/RyanSAdams/status/1693799871197622344  6:15 Sassal’s take https://twitter.com/sassal0x/status/1693803825747107973  9:00 How friend.tech works 13:00 Is anyone using friend.tech? https://imgur.com/uLOTIYB  15:10 Non-crypto influencers using friend.tech https://imgur.com/iq0lwlS  https://www.bankless.com/can-friend-tech-go-mainstream  17:00 Anti-friend.tech takes https://twitter.com/AutismCapital/status/1693759402908815480  https://twitter.com/RyanSAdams/status/1693977201618653260  This is a glimpse of a brand new SocialFi stack! https://twitter.com/nnnnicholas/status/1691591282395619686  37:00 David’s friend.tech conclusion (as of today) 43:52 Market Maximization & Financialization   45:31 Net Good vs. Net Bad?  49:53 Meme of the episode 51:31 Sleeping Dragon 52:46 Closing & Disclosures  ----- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠ 

ICOs, oof, not great. Like, NFT mince, ooh, not great. But we have to remember that, like, that part of the market cycle for financial assets exists before and after crypto. And the reason why we don't see it in the traditional world is because by the time a traditional equity

IPOs on the stock market, all of that speculation by early VCs, the first round of financing, the second round of financing, that's not available to the general public. And so this is the naked truth of markets. And now it's public. and the public is reacting to it.

Is Friend.com. Good or Bad? That's the conversation David and I want to have today. This is a special episode, I think an opinion episode, getting into some controversy here. Friend.com. This is an app that has dominated the crypto landscape for the last two weeks, kind of exploded on the scene. And now it's breaking out into mainstream audiences. These are non-crypto audiences.

So should we pat ourselves on the back? Is this a moment for victory lap? And congratulations? Or do we need to take a moment to more carefully reflect on the consequences of this new financialized social application? Some questions we're asking today. Is friend. Is friend.com good or bad?

Are financialization in Ponzi games all that crypto can really give to the world? Is any of this even a correct conclusion? Or maybe we're just moralizing this whole crypto thing too much? These are the conversations I want to have with you today, David. What are your thoughts going to this episode? Why are we even doing it? I think on the surface level, friends, dot tech, friend. Tech is a fun

game for crypto influencers and their followers all kind of played together. And I think simultaneously while that, you know, shenanigans is happening, there's another conversation brewing as to like what are the deeper consequences of an application like this if it does scale to the whole mainstream world.

Is this the crypto dream? Is this what it means to be a crypto person? I don't think a lot of people are here for that mission or that future. And so I think we also need to also define the concerns that people are having about what are the values basically embedded into an application like friend.com. And we can't seem to, as a crypto industry, create too much other than some form of financialization of things that already exist, like social media apps. And so is this all that we have to give? Do we, is this what we have for the world is, hey, here is your web two and web three is web two.

but now with finance. Is that really it? And is that what we want? And is that good? I think there's a lot of different little nuances to unpack. And so that's what we're going to do here on this episode. Yeah, I think there's a good opportunity to figure out what we really care about and why we're here. And any excuse to do that, we take it on bankless. So guys, that's what you're in for today. Before we get to the episode, we want to thank the sponsors that made this possible, including our recommended exchange for 2023, Cracken. Go check them out. Cracken Pro has easily become the best crypto trading platform in the industry. The place I use to check the charts and the crypto prices, even when I'm not looking to place a trade.

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building your first app with Arbitrum. Experience Web3 development the way it was always meant to be. Secure, fast, cheap, and friction-free. I put the question, is Friend.com, good or bad for crypto out on Twitter? And of course, most of my followers, just like yours, David, they skew crypto-native. And I was actually really surprised at what the results were. So, good, that option, got 53%. bad got 47%. Let me ask you, before we continue this episode, were you surprised by results like

these? Certainly. Yeah, I was ready for good to mostly dominate the fact that we were basically at 50-50. I was surprised as to how many friend defectors there are out there, friend naysayers. Yeah, and I will say on bankless, the last couple of weeks, we've been pretty favorable about it. It seems like a new proof-of-concept application. So this is an alternative opinion. I think we need to hear. This is Anthony Sassano replying to this tweet. He says, I haven't seen crypto Twitter this divided on something in a while. And I think he's right. There are a lot of haters out there of this entire friend.com experiment. And that's important to go into. David, before we talk about kind of the controversy and the pros and cons of this particular application, maybe we should

spend a minute actually defining what this thing is. So this is what we might call a social phi. That's been a term going around lately as a sort of a new narrative. But it's like a social Ponzi game on the layer two base. And notice, by the way, I said Ponzi game, which is very distinct from a Ponzi scheme. To us and how we've long used this term, a Ponzi game is completely transparent. You kind of know what you're getting into. I would say in some ways, Bitcoin is a bit of a Ponzi game, something like Ethereum. Ether the asset is a bit of a Ponzi game.

I even think the dollar, Fiat, is a bit of a Ponzi game. It's something that gets its value from narrative belief. So don't be distracted by our use of the term Ponzi game, but maybe you could describe this. Specifically, the game element implies a scheme is a scheme and a game is a game. A Ponzi scheme implies as a central operator who has differing incentives. And a Ponzi game is simply referencing the fact that in order for this to be successful, we need to have a constant inflow of new people in order for this to work.

New believers. New believers, if you will. And I actually don't want to necessarily ascribe whether or not something is a Ponzi game is a very deep and long conversation. And I think longtime bankless listeners who have perhaps listened to every single bankless episode will understand the nuances that come with that term.

It's got a very negative connotation. And we actually are using it in a very neutral way, I would say. And so I think part of the way world of money and finance like dollar it's a piece of paper and people are paying money for it it's a Ponzi game in the sense that it's almost synonymous a Ponzi game is almost synonymous with finance and so i don't want to ascribe necessarily some sort of like opinion to this word ponzi it's just like when you go very deep and understand the world of money and finance you understand that well everything is a story and everything is kind of a Ponzi and what is the dollar

well it's a ponzi that doesn't pop and so there's a lot of like there's a lot of connotation baked into this Ponzi word. I don't want to get distracted by that. Yeah, so I probably shouldn't have led with this loaded term if you're not familiar with all of that background. So let me maybe restart that. This is a social game of sorts on crypto. Social financialization game. Yeah, social financialization game where you can buy and sell your friends, essentially, or shares of your friends. Could you describe this in a bit more detail, David? So when you log into this new app, friend tech, you connect your Twitter accounts. And so you need a Twitter account to get started. and that's because you are using your social graph on Twitter

to bootstrap your social graph on friend. It's friend.tech, I always want to say friends. As soon as your Twitter account gets loaded up, you are given a base address, and then you load up your address with some ether, and you buy your first share of yourself, and that opens up your room. And any of your shareholders,

these are now called keys, any of your key holders can unlock your room so your key holders can start to chat with you. And so every single person on a friend has their own room and they get to chat with anyone who owns some of their keys. I'm just going to go back to start using friends shares. When you say room, you mean chat room, right? It's a chat room. It's a chat room.

Yes. And so me as someone who has a bunch of Twitter followers, when I made my room, a bunch of my followers were able to buy my shares and we were able to start to chat with each other. I have 190,000 followers on Twitter. I have, I think, like, 60 shareholders on friends. And so that's a much smaller, concerted group of people. And these people have paid anywhere between 0.01 to 0.5 ether to be in that room. Importantly, the price of shares is on a bonding curve. And so as more shares are minted, the price of these things go up.

If you are a shareholder, you can burn your share at any time and you will receive back the current price of the bonding curve. And so if you bought my share at like 0.01, well, you could sell it today into the bonding curve for 0.5 because that is how much one of my shares is worth. And so this is where it starts to get into a little bit of a financialization system. The more shareholders you have, the more expensive you are, which is kind of what a free market does. The only thing that's different is that this is on a fixed curve. And so a lot of influencers, and also importantly, when you buy or sell a share, there is a, a 10% tax that is charged.

And that tax is split 50-50. One half goes to the creators of Friend Tech. And then the other half goes to the person that you are selling that share for. And so me as a, and anyone on the app, they also accumulate trading fees for anyone who is buying or selling your shares. And so you get more money as people sell or buy your shares.

So as a creator, you are essentially getting trading fees. Anytime someone buys or sells. So you want you kind of as a creator, you sort of, I'm using this term creator. I think creators is a right term. I think that's a right. Okay, trader, influencer. These things might be synonymous in the rest of this conversation. You're incentivized towards volume, I suppose. That's one in. And as an owner of these shares, again, they're called keys, but we'll use that term synonymously again. As the owner of these shares, you're incentivized towards a number goes up, right? You start to get more bullish. And what's interesting here is you have, you said, 190,000 followers on Twitter. It's free on Twitter to follow David.

Okay. To get access to this room, it costs money. And it costs money to an increasing degree, which is a completely different game that we're playing. The other thing I guess I'll mention is, of course, this is all on defy rails, right? Right. So that means this is smart contracts. Everything's very composable. I think I saw maybe last weekend, David, though you've been tracking this much more closely than I have. Like, the ability. ability to sort of export these friend shares, these friend keys as an ERC 20. So I could like start to buy David shares if I want on regular uniswap bonding curves. Is that correct? Or it's like these things are plugged into other areas of the open defy economy. Yes, that's right. It's a money

Lego. And so some people were able to make a contract that buys or sell shares on the bonding curve and then also turn those shares into ERC20 tokens that can be built into uniswap. So it's plugable in with the rest of Defi is composable. Okay. Now, the question that my mind goes to is like, oh, cool, we've created something neat we think is neat or some segment thinks is neat. Is anyone using it? What is the answer to that question?

Is anyone actually using this thing? The answer is definitely yes. A friend tech got released about two weeks ago. 110,000 unique addresses have connected to base and to Frentec. So that is 110,000 unique Twitter accounts. And so while we typically don't ascribe unique addresses to unique users for many reasons, this one actually has stronger assurances than other platforms because of the connection to Twitter.

So that basically call it 100,000 people inside of two weeks. And some people from the Web 2 world are not impressed by those numbers, but let me tell you, in crypto and Web 3, these are big freaking numbers. Especially for the market. Like our biggest apps don't see this kind of daily active, monthly active type of activity in crypto. So our apps, crypto apps are most often, you know, I guess size based on value in assets under management or total locked value, these types of measures.

So when we see a large group, a large of real humans using an app, that's a pretty big freaking deal. I also saw it like tweets from Brian Armstrong, for example, the transactions per second that a base is serving up has now surpassed Ethereum. And a lot of that traffic is driven by this application, the Friends.com tech application. We're at two million total transactions from Friends. And then also there's 21, almost 22,000 ether in trading volume, which is about $38 million. So $38 million have changed hands because of this application. Now, reminder, that's 10% of a fee is taken on all of that trading volume. So that's, and then that is split down the middle between creators and the team. And so that's

basically almost $2 million in revenue for the team and almost $2 million in cumulative revenue for all the creators on the app. I mean, not bad for two weeks, right? Yeah. And this thing looks like it might be picking up more steam, even though I think volumes are down like the last 24 hours or so. this looks like it's leaking into mainstream, almost in a way that NFTs did. What are we looking at here, David? Yeah, so this is just a composite of a number of different things

that I saw on Twitter. We have on the top left, Faye's Banks, Gracie Hardy, Grayson Allen, as new people playing in Friends. Fays Banks is a YouTuber. Gracie Hardy is an only fan's creator. Grayson Allen is an NBA player. So three different, very different corners of the internet.

Very different. Yeah. We also have Disclosure, who is a DJ duo, very crypto-native DJ duo friends with the Delphi Digital guys and Delphi Digital got them into Friend Tech. And then on the right, we just see what was my home screen where you can just kind of see global activity. And like, I know what a crypto person is and who they are.

And I can definitely tell that the Kisu Hart only at fans in bio person is not a crypto person. That is an only fan's creator. And so you can just see the different people that have shown up for using Friend Tech. It makes sense that who's next in going to after the CryptoNatives to adopt this platform? Well, it's going to be creator economy folk,

and that's going to be only fans. And also YouTubers, people who create and have fans, general social media type stuff. So there we go. This could go from a crypto-native sort of toy to mainstream very quickly, right? And that's what we see happen to NFT. so it's not unprecedented even crypto for us to get these breakout applications.

And this shows hints and signs of a major breakout application. Of course, it might not be friend.com. It could be some other social finance application that's using a similar mechanism, but like it's early and it's showing signs. As I mentioned in the intro, David and I, Bankless has mostly been supportive of this experiment. I mean, it seems fun to us. Hey, people are using our apps. It's great.

It's crypto, right? It's defy. It's getting private keys in the hands of more people. I think there's some question as to how non-custodial this wallet is. The implementation details aside, this has the potential to get usage on later 2's up. And that's always a good thing. More people, more block space, more apps that go mainstream. The worst case scenario for me for crypto is like we build all this stuff and no one actually uses it. But, and this is what I think the rest of this episode is about, there's also some arguments against this. some people in the crypto community, as we mentioned earlier, 42, 43%, I actually hate this experiment. They're actually very much resistant to it. And we want to give air and oxygen to that opinion, too, because I think there's some merit here, and I think it's worth consideration. So shall we dive into that now, David?

Yeah, that's it. All right. So this was a tweet that was brought to my attention from someone in the bankless discord, from Autism Capital. You know, it's an interesting account here, but regarding Friend Tech, it's sad. that after SBF, there's no pretense of doing good through crypto anymore or even trying to change the world for the better. No more talk of decentralization, no saving the world, no conviction at all. Vitalik is quiet. All the old layer one promoters are quiet. All the loud voices have

cashed out and gone silent. There was nothing learned from the last cycle of scammers, shit coin promoters, and massive founder secondaries. You were all dumped on by these guys. Now you're allowing yourself to be dumped on again with this new bullshit. You learn nothing. And now the shell of crypto is all purely PVP from the other guy now. The NFT scumbaggery managed to get even worse, concentrated zero value creation for the world, absolute Moloch. Congratulations, you played yourself, and in the short-term money grab, you're cheapening the broader narrative of crypto being a force for change for a short-term fool's game. And the response to this will likely be LOL, STFU, I don't know, I'm making fees. Wow. Yeah. Oof, pretty hard-hating statements. There was also a take

from a bankless citizen that this tweet spawned a conversation inside of the bankless discord. And so the citizen said, in my opinion, it's incredibly reckless. And I lose respect for anyone who is presenting this app as some kind of breakout Web3 app. Have fun with it if you want until you lose your money. But it has nothing to do with Web3 or crypto values. The entire premise of financializing social relationships is also, in my opinion, a contemptible concept were the only of mockery. Big influencer accounts found yet another way to extract value from the herd, so this craze will continue until the next fashionable Ponzi is unveiled.

It's not what I signed up for, but let's face it, no one gives a damn. If you have dot-eath in your name, it's just experimenting and anything goes. Who cares that I'm shilling this to ordinary people who are going to get wrecked? Me and all my rich friends are making free money. This is great. All of the innovative tech is just used to create more advanced Ponzi's. Now, this is a take that I think this is what, well articulated for the contrarian side of friend tech.

And this is also a sentiment that I've heard across crypto, both inside and outside of crypto. And just overall, I would say this shares a sentiment with a very deep concern about crypto. Like we have many, many apps that look and feel and share some elements with friend tech. And it's about like the underlying structure of these things and concerns about financialization at its very core.

And some things I think, are very deeply tied to what crypto is. Like, crypto almost is synonymous with financialization. I know there's a bunch of non-financial use cases of crypto that we are really trying to crack the nut of, things like identity. But for now, really, the thing that crypto has been able to do is produce more finance than we had before.

And I think a lot of people are in crypto for deeper reasons than that, and they get jaded by all of these financialization apps that seemed to blow through into mainstream before anything else. Well, I get it. I mean, like 2022, that was all greed inspired, right? That was all I was doing that. So the comments that you just articulated, we've also heard that from crypto-sceptics

who are also fairly crypto-knowledgeable, like Molly White. Like, you're just financializing everything. You're just creating pyramid games out of everything and praying on your social relationships. And is that really what crypto is about? So I think the aversion here is crypto just because, coming this gambling, greed-inspired Ponzi thing that seems custom built to only serve already rich influencers.

All right? That's like when you look at this platform, that's what it kind of looks like. And here we are, we're bankless, right? We're crypto, decentralized values. We're supposed to be changing the world. And we're celebrating this hollowed out Ponzi game yet again. And people are going there scratching their heads and they're like, is that the best that we have?

Is this what we're offering to the world? And here we are in the bear market. And we've talked about this being sort of the build market where the tourist are gone, the settlers stay. And we're supposed to be building stuff that helps the world, that drives utility to real people. And instead, we're getting caught in these cheap tourist traps. And so some people are looking at this and they're going, that's not what I signed up for. I'm not saying I agree entirely with that sentiment and we'll discuss why. But I think that's like a summation of it for me. I think a lot of frustration comes from how readily accepting

crypto was of friend tech. And I think the current state of crypto could probably be excused from that. Because like what did we have in 2022? We had Algo stable coins that were unbacked, completely blow up. We had a Ponzi that went to zero. And now everyone hates crypto. And we are desperately seeking validation from mainstream society in any way, shape, or form. And so I think a lot, our standards perhaps are lower than they otherwise would be, because we, finally have these protocols that we're pretty proud of, I'd say. We have base, the layer two, that everyone is really optimistic about. And the transactions are cheap. And the transactions are cheap and free. And the U.S. is great. And onboarding is so fast. And so this, a lot of crypto is like,

look at, look at what we can do. Look at this latent power that we have. As soon as somebody can figure out how to put all the pieces together, we will have explosions of mainstream applications. And so I think crypto and myself included are the reason why we accepted friend app, friend tech so quickly is because of this. It's proof that we were able to go mainstream. Yes, it was with this financialization of social relationships. And yes, as soon as I got into friend tech, I was like, oh, this is a transfer of wealth from small to large.

This is what is built in here. Like, am I going to, like, me as somebody with 190,000 followers, I go into friend tech and I immediately get 0.4 ether from trading fees. an advantage, obviously. I have the advantage, right? And so that, but I'm willing to excuse that because influencers exist both inside and outside of crypto. And there's no new dynamics here. Like, you know, the people with one million accounts on Instagram also get tailwinds of capital and fame and stuff like this, right? So now the only thing that's different is we are taking that same power that influencers have in the first place in Web 2. And now we're also layering on financialization onto it,

which is what happens in Web 3. And so I think a lot of us kind of excused that element because we were just so stoked to see something actually work and break out out of this bear market. But maybe it's also fine. I can tell in your response there that you're like deeply considering that alternative. And you're kind of like wondering, well, you know, is this bad?

I even question the premise of why should you feel bad for this? Do you like, why should any influencer sort of feel bad for this, right? Isn't this just another kind of mechanism? I mean, I guess a few things I'd say, and this would be sort of the opposite take, and then we'll get to what you and I maybe think about this, and we'll bat this back and forth a little bit, though. One take is this is just a POC. It's a proof of concept, right? So it's basically like, look what we can do with this new social file stack, and, you know, our transactions are cheap, and this is a layer two fluxing its muscle, and we can get by the app store and Android, and like, it might not be this, but like, isn't this great? We're selling block space.

Look at the potential here. Right. Even if friend tech is evil, the ends justify the means because it shows us the past. Sure. Sure. And there's like, look, we vampire attacked an evil web two company, right? Isn't that the whole like purpose? Like people are so, you know, incentivized to port their social graphs.

So that's one element. And I said on a roll up, I think a week ago, like I've switched bullish on socialify as a result of this experiment. But I also want to question the premise of like why you should even feel bad about this. Do you know, because it's transparent. Right. Like, everybody knows that there is a bonding curve and that, like, what they're getting, if they buy David Keys or anybody's keys, is just access to a chat room. Like, I almost feel similar to how I felt about JPEGs, at least in the early stages,

which is like, guys, you're buying a JPEG. It's a picture. There's nothing hidden there. There's nothing hidden. This is like, so if you want to value art, like, you know, and you think, and Mona Lisa is valuable other elements of art, and you don't really know why. Well, like, it's all about kind of social, cultural value,

and that stuff can be so fleeting. But you know exactly what you're buying when you're buying a board ape JPEG, don't you? I think this is why people were getting excited because say you're not a crypto person, you don't need to explain a bonding curve. Like, oh, yeah, when you buy shares or keys, the price goes up. Yeah, and people are like, oh, yeah, that makes sense.

Yeah, I understand that. So that's the thing. I'm not sure that you should feel bad about this, right? And that's where the conversation is. And there's another retort which is like, what's wrong with having fun? You know, I could also say like, people can't stop it, right? So another reaction to somebody who is like worried about this and concerned about this is, okay, don't use it. There's lots of games that I don't play in crypto.

Like I just choose not to. Like you get to choose your character class when you enter. You can be a trader if you want. You can just stack you. You don't have to do it. You can get into the end. NFT community and trade JPEG, or you don't have to. Like, you could just opt out.

Yeah, so what do you think about those replies? Yeah, and every single, I think a lot of people are ascribing responsibility to the platform when they ought to ascribe more responsibility to the individual creators and how they manage their own chairs and how they manage their own bonding curve, right? And so I saw a quote from one of these accounts who was saying like, oh yeah, Suu, who is like one the lead creators on Friend Tech. Not a great look. He isn't?

Oh yeah. Yeah. He is? He's like in the top 20 leader board. Yeah. And so like somebody, somebody said like, oh yeah, Suzu is in his own chat room saying that he thinks his own prices can go higher. And I'm like,

of course. Of course Suzu says that. Like, what are you doing? Yeah. Also that, right? This is like a lot of it is on the responsibility of the people partaking in these games, right?

And so like I, as soon as I got into Friend Tech, like I said, I understood that, okay, this is a transfer from small. to big. Like many small accounts are going to be buying the shares of the big accounts and then the big accounts are going to accumulate the ether and then they're going to promote their accounts and say, which should try and incentivize more people to buy their shares so they can give more trading fees.

I realized that as soon as I got in there, which is why I did that, like, I'm going to give away my trading fees to some of my, to one of my shareholders inside of seven days, which is both me pumping my own shares and then also giving away the accumulated revenue because I didn't want like to have any sort of evil ascribed to me. So I'm playing the game and also trying to do my, put my best foot forward with it. So that was my approach. And I think like a lot of people need to, the responsibility that people are trying to ascribe to the friend tech platform should also be beholden upon the people who are managing their own chairs. Yes. Technology is a tool, is a neutral tool, hopefully. And it's really about how you use it and what you do with it. And I always,

think that we can totally also talk about the way that the platform itself is constructed. The mechanism design itself. Because I think the concerns about friend tech is that sweet, if we get all these influencers on this imbalanced platform, I thought we're trying to make balanced platforms. And friend tech doesn't seem to be balanced when it so rapidly rewards people who already have social capital and financial capital. Right. Okay. So there's two levels of criticism here.

There's one, a criticism about the underlying mechanism and the system, which is certainly valid. And then you're also making the point that the same social primitive that a creator can use to rug their community can also be used by a creator to build a fantastic community, right? And so the technology itself is somewhat neutral, although the mechanism design behind the scenes of the civil. can be either like good or bad or something, right? Balanced or imbalanced? And I also will say,

even if you do say, think that the friend tech platform is imbalanced, I will say it's built on the OP stack, which 15% of all the trading revenue from base goes to retroactive public goods funding. Sure. And so this is the whole theory, the whole thesis behind the optimism and vision, which is degeneracy turns into regeneracy. So maybe the imbalance of friends is concerning and we should talk about that. But I also will say at least it's built on top of the super chain, which is supposed to turn transaction fees into public goods. There's levels to that too. And what is the super chain? What is the optimism ecosystem built on top of? It's built on top of Ethereum, which is an open, permissionless, decentralized public good for the world that needs to be

funded by fees. That's how we're funding this whole thing. And there's been a lot of degeneracy that's actually funded, you know, the block space of Ethereum, right, including some fantastic things. But that's how we get a global banking system that is actually permissionless and can scale to the world and can be opt in. So there's a public good being created as a byproduct of that. There's also a point that Van Spencer made in our episode yesterday, David, which is creators don't have a lot of ways to make money in general online. There are often intermediated by third parties or aggregators, right? And so the internet was a force for disintermediation, for democratization for creators, but it has its limits. And now here's a new way for creators to monetize,

right? Again, that can be either, you know, it could be Suu, like about to rug you, or it could be, I don't know, some creator who's creating a, you know, fantastic chat room for their followers. And this is a tokenized mechanism to, you know, participate. in that and to build a community around it. And so that it feels like could be a net good as well. And then there's also the argument that this gets more private keys and more hands. Right. Yeah, I do think we really should put a pin

on the argument that we are just introducing financialization into our social relationships. Well, Facebook, Twitter, well, Twitter is actually paying out royalty fees to creator. So maybe Twitter's a, or excuse me, X is a new case here. But like I think people are forgetting the fact that like Facebook has previously robbed content creators, creators of the opportunity to financialize themselves.

And so this is actually restoring that power to creators. I will say the 5% take rate from the app is pretty steep, but it also makes sense for what it would be in the early days. I would expect that to either be routed around or come down over time. But you know, you know, the old kind of Chris Dixon thing, and this comes from Bezos, like your take rate my opportunity. I think these margins will continue to control. And if you compare 5% to like 30% for the App Store or like 0% and Facebook just monetizes all of its user data, it gives nothing back.

5% is kind of low. And if friend tech gets competitors, then that might compress to like 2.5% to 1% on downwards. Yeah, this is an adjacent conversation. But the ERC 20 tokenization of shares that is a contract that got built and deployed by a developer out recently. So now you can take your shares, turn them into ERC 20 tokens, and then they're on uniswap. well we actually have tools like collab land and telegram rooms where you if you own a token you unlock a telegram room so we actually already have the components to rebuild friend tech

without friend tech and so I think this is why like maybe friend tech isn't the thing that is going to blow up or maybe it's not the long-term equilibrium of these things but you can rebuild friend tech without the fees using uniswap ERC 20 tokens collaborate land and telegram And now people are privy to this. And so I don't think this, the current state of things is where equilibrium is going to end up at. Are you a Metamask user? Well, you're listening to Bankless, so of course you are.

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this. And then we talked about why it's awesome. I want to kind of ask you what you think about this. And maybe I'll frame this with like kind of your conclusion to date at this point in time, right? Again, this experiment could like turn in a even more positive direction or it could go into kind of a negative direction. So obviously this is your take, a snapshot in time, I would say. But I think the biggest criticism that stands out for me on the against why Frontec is bad type of case is, is this really what we want to be known for to mainstream? It's, SBF monkey jpegs and like social pyramid schemes. Like I thought we were here to change the world.

I thought this was like a democratization play and equality to everyone play. Okay. And so yes, Ryan and David, I can opt into this or not. But now I see like my social layer, all of these people in crypto whom I respect. And what are they talking about? It looks like, again, this is a social. media type of effect so you can get in kind of these bubbles, but it looks like everybody's talking about this Ponzi pyramid scheme and getting excited about it. And maybe it looks like they're shilling

it to me. And they see this and they're like, WTF, layer zero. I thought that the social layer of crypto stood for more than this. So I guess where do you, where do you stand on all of this at this point? So we talked about the against use case and the, you know, like the four use case. what's your take after absorbing this kind of reaction in this opinion? Part of what I consider to be the bull market for crypto at large is the explosion of more markets for more things. And I think markets are inherently good. Like I know we know technology is neutral.

I think markets are good because if a market exists, there means that there's no monopoly. So the market is the opposite of a monopoly. It is the bazaar, not the cathedral. And to me, that a bazaar is something that is foundationally in balance. There is an equilibrium there. Markets don't behold in any one participant more than the other. So if Ethereum wins, there will be more markets for more things. I think actually the bulk case for Ethereum for crypto is like market maximalism.

And so I think that is inherently tied to the financialization of things. things. And I think we kind of need to accept that. And I think that this is good because more markets implies fairness and decentralization. Now, when we have these new things, when we discover something on the crypto frontier, what happens first? The apes and the gambling and the speculation rush there sooner than everything else because there's profits to be made. And this is just because of this thing called price discovery. And so, like, as somebody who's been on Friends Tech for almost two weeks now, my trading volume in days one through five were insane, very high. And then, like, the big wave of adoption came in, and my market volume was still pretty good, even with these new influx of new people.

I don't think somebody, I don't think a share of mine has been traded in the last two days because the 66 people that are in my shareholder room, we're just chatting, we're just hanging out. they're asking me questions. There's no churn anymore. And I think because the speculation has gone away and now we've discovered an equilibrium where actually the value of my shares is reflective of the actual value

and time and energy that I'm injecting into my room. And so the apes come first and they leave a real bad taste in everyone's mouth because it's degenrecy, it's speculation, it's risk-taking, it's financialization. But then the equilibrium that sets in afterwards is more or less invisible and creators are just creating

and market participants are participating. And so that's the utility phase. And so I think a lot of bad taste comes just because that is the natural order of markets. Like when markets are established, I don't know if you've ever custom, if you've ever minted a uniswap market, Ryan, or being very, very early in a uniswap market. But like, you get haircuts left and right unless you're playing the game extremely well because it's so illiquid and it's just MEV bots and it's just complete like arbitrage opportunities. And then something like USC Ether pair sets in and we have super illicit.

illiquidity and there's no fleecing anymore, right? And so I think that's just the early days of Friends Tech. It's just like, oh yeah, everyone is playing the price discovery game. Everyone's speculating. Everyone's like blah, blah, blah, blah. But then over time, as time goes on, the market's mature. And again, we have markets established, which is something that has been robbed from creators. And I would say that's the good case for Friend Tech or things like it. That's the bull case, I would say. So you think people are just inherently uncomfortable and maybe we can't blame them about this speculation type phase

because it looks ugly. It's like dot com you know, boom and then busty, right? Well, that's what people are saying like, oh yeah, everyone's just going to lose their money. And yeah,

if you enter that part of the, of that part of the market before you're ready and you're playing with more sophisticated actors, yeah, you will lose money. Yeah. But if you also just buy a share and just hang out in the room

and don't participate in the speculation game and you're just buying a share of the creator because you're just buying a share of the creator because you want to be there and get the utility, then you're not going to get fleeced. So I think that's a broader point. I think that's important.

Some people are just not comfortable with the speculation phase of markets, right? Because the rest of their life isn't kind of like that. So they see things that go up and then they go down and level out and they automatically call those kind of like, I know, tulips or scams or schemes. And like everything productive has gone through that cycle, hasn't it? Right. Yeah, well, so part of the crypto world, like, ICOs, ooh, not great.

Like, NFT mince, ooh, not great. But we have to remember that, like, that part of the market cycle for financial assets exists before and after crypto. And the reason why we don't see it in the traditional world is because by the time a traditional equity IPOs on the stock market, all of that speculation by early VCs, the first round of financing, the second round of financing, that's not available to the general public. And so this is the naked truth of markets. And now it's public. And the public is reacting to it.

But that's just because they finally have the option to react to it. They can actually see it. It can actually see it for the first time. Yes, exactly. We can exactly see how degenerate humanity is as a whole. But previously, we were never even able to have these opportunities at all because VCs were able to have like the 10,000 X gains before anything would go public. This market maximalism that you said is kind of inherent with,

crypto. I agree that that's the take. And I also go back to kind of the deeper thing. And this is the best encapsulated in our episode with Molly White. Like she hears what you're saying and you're basically like, uh, trust me, bro. Once we get through this like a financialization cycle, everything's going to be net better. Right. And she's like, yeah, by net better, you mean you get richer. You know what I mean? You and your friends get more powerful and more rich. Right. And And, you know, got to say on the back of 2022, tushé, all right? And also, I just don't think that that, like, I do think that free markets and the ability to own digital property is a net good that is worth going through these painful speculation

phases. And that's almost like, I don't think we've fully seen that yet, right? I think we've seen it in fits and starts, right? Now there's a thing called Bitcoin. it actually has some liquidity. Now there's a thing called ether. It has some liquidity. Anyone can spin up a uniswap market. We are helping communities in Africa, communities in Argentina, get out of their repressive government systems, get access to a public, open, internet native banking system. Those are some of the net good that we've created. But to the point, I'm not sure that the net good yet, yet,

outweighs some of the net bad experiments that we've seen. And it's almost like an article of faith that it will at some point. I think probably for me, it already outweighs, but like the bad because I put so much value on freedom like markets. And I see like a dystopian, authoritarian future. I mean, we're just coming to this episode, David, we had the developers behind Tornado Cash. They were just arrested by the United States. okay and like it looks like the charges are they developed some privacy tech code yeah right haven't gotten into the details yeah i'm pretty sure those are the charges we'll talk about it more on the roll up tomorrow right to me that is a bigger threat to like this whole um living like humanity experiment

than anything the crypto is throwing at us with opt-in you know social finance type games and so that's the net good and that's the prize I kind of see, but not everyone sees it like that. And people are inherently uncomfortable with the speculation phase. I think what is really valuable about these conversations is allowing the immune system, the white blood cells of crypto, to raise their head and say, I don't accept this platform as legitimate because it's too imbalanced. And I think I'm willing to give Friend Tech the benefit of the doubt and say the end justifies the means, and this is just an important, like you said,

proof of concept to define what people want and how to get there. And the 5% take rate is really high that from the platform, but that's totally malleable. And I mean, it makes sense to while there is this speculation phase to try and cash in and get revenue so that they can be a sustainable platform and then learn through research and development how to build a more equitable platform that is more inclusive for everyone.

And so I'm willing as like the generally trusting optimist in this industry to give Friend Tech the benefit of the doubt saying like, okay, through feedback, through this white blood cell immune response, that is this conversation that people are having on crypto Twitter and elsewhere, we are learning about how to build a more balanced friend creator economy platform. So I'm willing to give the team the benefit of the doubt that that is where their ultimate goal is going to go. Yeah, I agree with that. And I'm actually kind of bullish on the immune system response, honestly. So I appreciate the questioning of this because I think the bigger threat to crypto is not sort of the moral virtue here. But it's more kind of the nihilism that you see everywhere, which is just exemplified by like, you know, I'll get rich. F you. Like, and there's no kind of... Oh, you're getting rich F you. Yeah. And everyone is playing this game and no one has any like virtue or morality and no one's playing this game in like a way that is kind of

creative to the world. We're all just a bunch of selfish bastards. That nihilism is I think very counter to why I'm here and what I believe. So the fact that there is a immune system, a social layer, trying to like hold us to account. actually is a good thing because it pushes back against this nihilism that we see in other areas of crypto. And I think I do also see the point. So I think it would obviously be a mistake. We don't do this and we wouldn't do this. But if, let's say, bankless or any other and kind of the influential leader in the crypto sphere, just weighted at such they were talking about these types of applications, 80% of the time, or 90% of time, and talking about like the things that

really matter, the values and the public goods and why we're all here, only like 10% of the time. And so I think the community is right to kind of call people out when if these types of things become the only things that we talk about and care about, right? So obviously for bank lists, we want to continue to maintain our portfolio of like talking about the values of this industry and the why and the things we care about and spotlighting the bright projects, you know, closer to like 70% of the time or closer to 80% of the time, right? And so getting that balance right is honestly very important to me and I think is a lesson out of this for sure.

Yeah, I agree. David, I've heard you've got a meme to tie this off though. What are we looking at? Yeah, just to end this episode on a lighthearted note, we have a meme of the episode. So this is the Pepe with Glasses writing. on his piece of paper who's saying, who's apparently on the phone with the IRS, goes, hello, yes, IRS.

So my client brought friend tech shares for Kobe, Ansem, and Siphysis for 2.4-Eth each and proceeded to sell clients for three eth each to invest in their own shares. Client proceeded to get the revenue shares from trades on their shares and now has bought wrapped foo bars. Can client deduct gas fees

on wrapped food bars and bridging to gase? Oh, man. I'm looking forward to talking to my accountant about all my friends shenanigans. Well, I mean, there's that. There's also, like, the question of, like, what does the SEC do with these things? They're not shares, the keys.

Like, I mean, what are we? Like, there's going to be an interesting nation state reaction. And this is maybe the last thing I'll kind of finish on. Even if you don't like this app, I think the one thing we have to preserve across crypto is a big tent. All right. And here's why. I think that the biggest threat to crypto is,

remaining a niche of a bunch of weirdos using defy and using like privacy tools like tornado cash and we never get the legitimacy or voting power to actually change the laws in our like the biggest threat is we don't go mainstream david right and we're just relegated to this niche our best defense against that is to onboard the world and so um you know even if this isn't your jam i would encourage us all to be open to ways that normies will actually use our applications that we're not entirely crazy about today. On the note of whether or not all of these shares, keys or tokenized securities or not, are you familiar with the concept of a lock-on or a sleeping dragon? No. A what? Snapdrag?

Sleeping Dragon. Oh, okay. No. It's a protest maneuver. So imagine two protesters and they handcuff themselves together, but inside of PVC pipe or like a metal tube. And so you can't remove them. You can't undo the handcuff because of the pipe. Oh, wow. They basically like chain themselves together in a way that they make it difficult to remember. It's like there's too many of us.

You can't arrest us all sort of thing. Like you can't, we're all tokenizing ourselves and we're all doing illegal securities. What are you going to do arrest every single influencer? I think that was kind of funny. Well, because that goes back to one of these articles that I think I wrote like in 2021 after the NFT Mania came out. It was like, what are you going to do, Gary Gensler? You're going to make my flaming sword of fire security?

Like, what are you going to do, bro? You get to come arrest little Timmy for his item drop after he beat the boss for not, like, registering that? I don't know. It just kind of shows the fix that the SEC is, like, walking towards and we'll see what they do about it. There you go. Bankless Nation.

Hope you enjoyed the episode. Risk and disclosures, of course. Both David and I have friend. dot tech apps. I think David's shares are up a lot more than mine right now. So you should know that. But of course, got to let you know, as always, crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.