Token-driven decentralized social network Friend.tech may have lost momentum recently, but it has turned around since last week to more than triple its total locked value, confounding critics who were poised to lob at it the last rites.
Prominent mentions of the new social media network by prominent cryptocurrency industry investors at this year’s Token2049 Web3 conference in Singapore probably also surprised many. Putting skepticism aside, several panel guests cited Friend.tech as an example of innovation that hints at a potentially bright future for crypto.
Paul Veradittakit, managing partner at Pantera Capital, said Friend.tech managed to attract new users to Web3 not by appealing to a particular curiosity about digital assets, but by simply incorporating crypto into the appeal of a new model of social media.
“Friend.tech has done a really good job of sparking an early adopter movement,” he said. “Being able to hide the crypto component was an easy way to onboard (people) to be able to experience crypto with little crypto in the foreground.”
Alex Pack, co-founder and managing partner of Hack.VC, praised Friend.tech for bypassing the Apple Store and its crypto policies, which he called “very onerous.”
Boost for the creator economy
He said the platform offered new opportunities for users looking to monetize content, comparing its model favorably to that of social networks Web2, which he said exercised excessive power over users.
“The concept of crypto-social is really fascinating,” he said. “Facebook and Twitter were Trojan horses. They came in and created networks for people to talk to each other, and ultimately for their followers to interact with executives and creators, and then, in a sneaky way, they completely interfered in the way fans interact with executives and the creators, and they did everything they wanted. could make it difficult for (them) to understand who (their) subscribers are and how to monetize them directly.
“It was great for the social media companies because then they could control everything and disempower the legion of fans. The opportunity for Friend.tech and DeSo (Decentralized Social)… is that they could unbundle that and create a whole monetization layer for the creator economy.
Veradittakit said there was great potential for social media disruption, but Founders Fund partner Joey Krug said more work would be needed.
“In terms of social media and crypto in general, the main thing it needs to really take off is sort of a big zero-to-one difference from existing social media platforms,” he said. “I’m not sure anyone has really achieved their goal yet.”
Pack said more Web3 infrastructure would be needed for these platforms to realize their potential.
“There’s a lot to build, all the infrastructure, like token gated communities, bringing cash flow, royalties and real economics to it,” he said.
Krug focused on decentralized finance (DeFi) as a part of the ecosystem that needed infrastructure strengthening in order to grow to its full potential.
“The DeFi space, as a whole, currently seems to be in a trough of disillusionment,” he said. “But it’s an area that we’re fundamentally passionate about for the long term and we’re certainly looking to invest more there as well.”
Perhaps the most critical problem facing DeFi is simply the lack of tools that non-crypto natives can use, even the basics of staking, lending, and yield farming need to be demystified in order to gaining more users and traction in general.
Min Teo, managing partner at Ethereal Ventures, said DeFi developers might consider turning to TradFi for advice on improving the ecosystem.
“There’s a bit of an identity crisis right now between different products and protocols,” she said. “Look at the existing financial system: you have people creating B2B products for banks, and then asset managers who then distribute them to retail. In crypto and DeFi, everything has collapsed into one, so I divide the two when I think about it. And as we mature in DeFi innovation, I think there’s a good chance we’ll start to look more like how TradFi works.
“There are still a lot of basic primitives that need to be built to make the experience faster, improve latency and just make it more similar to what users are used to,” she said. “Otherwise, from an adoption perspective, it’s hard to see how we’re going to attract more users to the channel.”
“There just aren’t enough people building apps,” Krug said. “The infrastructure is at a point where…you could build something that was truly ground zero and people would say, ‘Wow! when they use your app. We didn’t think this was possible…six or seven years ago, but I think the current technology stack is at a point where it’s actually achievable.
Pack said stablecoins were essential to building the DeFi ecosystem and, as a representation of real-world assets, integrating DeFi into the broader architecture of the financial system.
“Stablecoins (are) the key element behind DeFi, and the most promising and exciting chart in crypto,” he said. Referring to their adoption trajectory, he said: “It’s still up and to the right, and there will be more real-world assets, and that will power DeFi, and that’s a positive feedback loop .”
“Today you could consider DeFi a crazy playground,” he said. “It’s just a really good jungle playground for crypto assets… but there are very few real-world assets, so if we could expand that and add more real-world assets – euros, Treasuries, stocks and that sort of thing…that’s probably the biggest thing as opposed to big infrastructural advancements, but once that happens, I think you can multiply it by 10 or 100.”
Pack and Krug said another boost for DeFi, and for crypto in general, could come from artificial intelligence, a fusion of technologies that has attracted considerable attention this year.
“There is an exciting opportunity for the use of DeFi and an open, composable and transparent financial system,” Pack said. “Today you go to ChatGPT and it’s… an AI agent – it writes your essays for you and helps you cheat on your homework, but it can’t do economic things. It can’t rebalance your portfolio, it can’t pay your bills, and it can’t run your business for you. You’ll need to integrate with hundreds or thousands of different payment processors. Or you can just go to DeFi with one click and everything is open to the API.
Krug said: “The AI agent thing… is actually an interesting area, (and) the next wave of DeFi will intersect with it a lot. If you think about cryptography, the way it works is actually a feature here, not a bug. This will be a big zone from zero to one. It will probably be a few years away – three to five years from next year.
“And then there’s a whole unexplored problem area that people haven’t yet built businesses around,” he said. “Some of them are smaller and they’re not zero to one, but one simple thing that I’m still shocked that no one has built is a borrowing aggregator (in which) you deposit ETH and borrow, let’s say, USDC and it continually refinances you to get the best rate. There’s nothing that does that, so there’s a lot to integrate into DeFi.”