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Friend.Tech Climbs DeFi Charts but Has Some Massive Red Flags

Tim Fries

Published: August 21, 2023 10:12 pm

Base-powered social web3 platform Friend.Tech is among the top crypto projects for fees and revenue generated in the past 24 hours, according to DefilLama data. However, despite solid activity numbers, the platform faces several noteworthy red flags related to data privacy, founders, and share-buying feature.

Friend.Tech Ranked Third for 24-Hour DeFi Revenue and Fees

Friend.Tech, a newly launched social platform built on Coinbase’s Base blockchain, generated more than $1.5 million in protocol fees over the past 24 hours, DefiLlama data shows. The sharp increase made Friend.Tech the third crypto project with the highest user-paid fees in 24 hours, behind Ethereum and Lido.

In addition, Friend.Tech is also ranked third for 24-hour revenue, raking in more than $709,000 during this period. However, despite its robust growth, the crypto community raised several red flags regarding the social platform, particularly its origin story, roadmap, and privacy policy.

Primarily, the community voiced concerns about how the platform captures and stores users’ data. Currently, the platform’s desktop site directs users to use their mobile devices to download the application. But the site provides minimal information on the project, its founders, and its whitepaper.

In addition, even though there’s a call to action button for privacy policy on Friend.Tech’s website, clicking on it results in a pop-up window that says: “Coming soon!.”

Moreover, speculations on social media suggest that Friend.Tech was built by pseudonymous developer Racer. Interestingly, Racer allegedly has a track record of projects that went viral briefly before collapsing, such as TweetDAO.

More worryingly, Spot On Chain noted that Friend.Tech’s API can be used to extract sensitive data from the platform, like showing the wallets created by the users. Soon after the tweet, a core developer for Yearn Finance, published a list of 101,000+ users with their wallet address and Twitter username. Additionally, the developer claims that every user on the platform had (unknowingly) given Friends.Tech permission to post on their behalf on Twitter.

Friend.Tech Shares May Be Considered Securities

One of the interesting features of Friend.Tech is the one that allows users to trade their own “shares” with other followers. For instance, buying someone’s shares provides owners with the ability to send private messages to them.

However, some argued that the shares of Friend.Tech may potentially be considered securities under the terms of the Howey Test. This test alleges that an investment contract is deemed to exist when it involves the investment of money, is traded within a common enterprise, is pursued with an expectation of profits, and is reliant solely on the efforts of others. Considering that buying Friend.Tech shares require real money, a plausible argument could be made for subjecting them to the Howey Test.

Built on Coinbase’s recently launched Base blockchain, the beta version of Friend.Tech launched on August 11. Its launch led to a massive increase in activity on Base, with the number of daily transactions hitting a new high of more than 900,000 on Sunday, significantly higher than the leading layer-2 chains Arbitrum and Optimism.

This article originally appeared on The Tokenist