DeFi’s total value locked ($38b) is the lowest since early 2021. It didn’t even dip this low after FTX’s collapse.
What’s going on? U.S. T-bills are at ~5.5% risk-free. That’s more than the median DeFi yield rate, and you don’t have to worry about exploits or smart contract risks. And LSDfi’s growth is taking a chunk out of DeFi.
I’m still bullish long-term on DeFi (Plus I don’t think “TheTBillsEdge” is as catchy).
Here’s what we got today:
- Friend.tech 101. A new paradigm or another ponzi?
- Pumpamentals. What makes a project go hyperbolic?
- Around the Web. OpenSea removes enforced creator royalties, Farcaster is migrating to OP mainnet, and more.
Here’s your Edge 🗡️!
The Rise of friend.tech
You’re a fan of some Crypto influencers. How much would you pay for access them and to pick their brain?
It looks like we’re able to find out through Friend.tech. While it did have a buzz last week, things went parabolic when Paradigm was revealed as a seed investor. It added legitimacy to the app, and further speculation of an airdrop.
Here are some impressive numbers:
- Users have deposited $68.5 million into the app.
- It has earned roughly $3.5 million in protocol fees (currently in the top 10 earning apps according to DeFi Llama)
- Friend.tech has had around 2 billion cumulative transactions.
What is friend.tech?
It’s an app on Base Chain you log into via your Twitter account. Inside, you can buy or sell ‘Keys’ – think of them as shares – of other users.
The twist? These Keys/tokens are minted on a bonding curve that increases prices as more are created. So if you can get in early on a user before everyone else, you can profit considerably.
There’s also another utility – right now, they get you into an exclusive chat with other Keyholders. There’s no guarantee that the Twitter user will engage, though.
You find a Twitter user that you think is “undervalued.” And over time, they can share Crypto Alpha, making their shares more valuable, at least theoretically.
Right now, it’s mainly Crypto influencers. We’re starting to see some OnlyFans creators, gamers, and mini-celebrities from other niches.
Oh, and a heads up: they take 10% off each transaction. Half goes to the protocol and half to the OG Twitter account holder. So, if you’re an influential personality, it’s free money.
The Bull Case for Friend.Tech
#1. It links ‘Keys’ value to real Twitter personalities. BitClout failed to do it. By linking Keys, private chats, and Twitter logins together, friend.tech ensures that when you buy a token, it’s genuinely tied to a specific creator.
#2. They’re teasing an airdrop. By using the app, you’ll be getting ‘airdrop points’. So this app could keep users around long enough in hopes of the airdrop coming.
#3. There’s a money-making opportunity. If anyone else buys ‘Keys’ after you, the price is bound to go up. After a few people buy, you can then dump on them. This is a dangerous game. But many degens aren’t there for money alone.
#4. It’s an entertaining game. People love to see their and other’s worth and to prove their own. I doubt your average degen is raking in big bucks on friend.tech. They’re in it for those sweet, addictive dopamine rushes. And there really isn’t much to do right now in the bear market.
#5. friend.tech has nailed user experience. They’ve chosen to be a mobile-only app and to create new wallets for users within the app. These choices lead to easier onboarding for users.
#6. Apps built on top of it. These apps take the experience to the next level. Here are a few examples:
- RealFriend (SniperBot)
- FriendMex (BitMex for Friend Tech)
- Wrapped Friends (Fractionalize your shares)
- Click here for a longer list.
The Bear Case for Friend.tech
#1. The bonding curve mechanism makes it similar to a Ponzi. Everyone’s priced out. As soon as someone’s on Friend Tech, bots can snipe them.
#2. We already saw this experiment fail before with BitClout, and this doesn’t look to innovate that much.
#3. The product’s immature. The chat is one way communication. There’s no desktop app. There’s no media in the chat.
#4. Are we all securities? Originally, user ‘keys’ tokens were called ‘shares’. This could have big implications if labeled as securities. So yea, if you’re doxxed and there are shares of yourself…
“So Edgy, if friend.tech is so hot, why aren’t you on it?“
I’m on friend.tech as a user on my burner account. I love experimenting with new protocols and traded a few of my friend’s shares.
But I’m not on it as The DeFi Edge.
Why? I like being in win/win situations. I’ve busted my balls for the past 1.5 years, building this brand and trust in this space.
So if I earn a ton of ETH through trading fees, but a few of you get rekt’ed trying to trade my shares, it’s not worth it.
Feel free to experiment and have some fun with it. But I do think it’s hard to profit from it unless you’re a large influencer.
Learn more here:
Pumpamental Analysis 101
Fundamentals are essential, but they’re not everything.
Crypto’s still speculative. And without eyes on your token, who’s buying it? To make that token pop, you need solid pumpamentals.
Hold up – pumpa-what-now? Pumpamentals are factors that cause the price of a token to increase rapidly and are not driven by fundamentals. They’re the elements that attract attention and interest to the project.
Here is the “6 Elements Framework”, which can help you evaluate a project’s pumpamentals.
Whenever an influencer or celebrity shows support for a token, it’s gonna stir up some buzz. Followers will become interested in buying the token and drive up its price.
Now, imagine a whole influencer entourage backing that same token. The hype? It’ll go from zero to a hundred at lightning speed.
Remember the Elon-Dogecoin saga? That’s a classic example of this phenomenon in action.
This is what’s going on now with friend.tech. Influencers are pumping it like crazy to earn trading fees + a potential airdrop. Or some protocols might hire influencers to pump their projects (like Rollbit).
But wait: don’t blindly ape into the tokens that influencers promote. Many are undisclosed promotions of scams and low-quality projects. Make sure the influencer is credible.
#2. Narrative-Product Fit
Narratives are trending ideas, stories, or beliefs that shape how people perceive and value cryptocurrencies. A killer narrative can send several linked projects to the moon.
We discuss narratives in this newsletter all the time. Current narratives include GambleFi, SocialFi, TG bots, LSDfi, etc.
If a project can tap into a hot narrative, it’ll get a big price boost. Just look at how Pendle leveraged the LSDfi narrative.
#3. Cults & Cult leaders
Cult leaders are people who have cultivated a cult-like following. Their followers will blindly trust whatever the cult leader says, including their “Non-Financial Advice”. Such leaders are compelling during bull markets when people are blinded by greediness.
The drill’s simple: the leader says he or she likes a token, and their fan club immediately goes all in. That token will enjoy heavy demand as long as the leader remains relevant.
Think about Sam Bankman-Fried and those Sam tokens he was all about. Or take a peek at Daniele Sesta and the Frog Nation craze. Or Terra Luna.
My rule? Hop on the ride early, but get off before it crashes.
#4. A Hot Ecosystem + Ecosystem Funds
Investments or grant funds are focused on supporting projects in a specific ecosystem. L1s or L2s often launch them to bootstrap their ecosystem.
What’s the big idea? To get teams to build and thrive within their ecosystem. Many alt L1s used this strategy. Now, many L2s are doing the same thing.
BitDao is proposing a $200m Mantle ecosystem fund. That’s going to grab a ton of attention and interest from dapps.
#5. Community Engagement
For a crypto project, having a supportive community matters a lot.
No community = no people to buy = no price appreciation.
Here are some specific ways to measure community engagement:
- Using Social Blade to check if they post consistently.
- Check if they consistently get 100s of likes on recent tweets.
- Check whether they have positive 1-week and 1-month growth. You can use XOs for this.
Ever bumped into GMX Blueberries or Link Marines? That’s what a hardcore community looks like.
#6 Marketing Stunts
Crypto is an attention game, which means a strong marketing team is essential. There are many different tactics they can use to attract attention to their project:
- Meme marketing
- Real-world sponsorships
- Advertisements & commercials
You can use specific tactics to evaluate these elements. I can’t list them all here (blame the word count!). Remember that when you’re sizing up a project’s pumpamentals, see how many of the above boxes it ticks.
You don’t need the full set, but more is always better.
🚀 DeFi Catalysts
CoW Swap has Launched TWAP Orders. It allows users to split their trades over time to get the best prices.
Farcaster, a decentralized social media protocol, is migrating to OP mainnet from the Ethereum mainnet.
Mantle has staked 40,000 ETH on Lido, the leading LSD. This stETH is worth around $66 million and will generate a yield of 4.1% APR at current rates.
Mantle paused its token migration contract to prevent FTX from converting its $43M in $BIT to $MNT. FTX Group’s BIT tokens are accused of having “various disqulifying factors”. The discussion is still ongoing.
dYdX is voting to adopt $DYDX as the native token of dYdX Chain. This is part of upcoming launch of dYdX Chain in dYdX v4.
Safe has launched an ecosystem grants program. They are proposing to create a support organization complementary to the Safe Grants program.
Aave V3 is live on Base. Almost all major dApps are looking to deploy on Base. It is becoming the center of DeFi activity.
Uniswap is proposing to deploy Uniswap V2 on all chains where V3 is deployed. This should help Uniswap attract users that would’ve gone competing DEXes.
LiFi, a multichain bridging protocol, has launched a multi-message aggregator. For protocol DAOs, this will remove vendor lock-in of bridges and allow new bridges to be added.
SparkLend, Aave competitor from MakerDAO, is discussing increasing wstETH market supply cap from 200k to 400k. The current lending pool for the token is maxed out.
Aevo listed index perpetual contracts for trading the market cap of Friend Tech accounts. Users can long or short the FRIEND index.
📰 Industry News
Tornado Cash founders were charged with money laundering and sanctions violations. This is seen as an attack on freedom by many crypto advocates.
Coinbase bought stake in Circle & is launching USDC natively on 6 blockchains: Base, Noble, Optimism, Polygon PoS, Near, & Polkadot.
StarkWare is going to open-source its Stark Prover named Stone. It will be available under the Apache 2.0 license starting next week, so devs can experiment with it.
Balancer disclosed a “critical vulnerability” affecting over 100 of its v2 pools across eight blockchains. The issue has been solved for around 80% of the impacted pools. The remaining 20% of pools represent around 4% of Balancer’s TVL.
OpenSea has decided to remove enforced creator royalties from August 31. It’ll be optional. They’ve also removed support for BNB Chain.
Bear market vibes.