Hardcore decryption of Friend.tech in-depth analysis of the operating principles and risks of FT

Intensive analysis of Friend.tech operating principles and risks of FT

Author: 0xKing; Source: King’s Chat

This article has a certain reading threshold. Readers need to understand the basic implementation method of Dapp and have some understanding and experience of Friend.tech. It is not intended as investment advice or misleading information, but only for technical discussion.

Overview

Friend.tech cleverly integrates decentralized finance (DeFi) and social networks, creating a unique “social influence game”. In this experiment, you can not only interact with friends, but also “vote with your feet” for them.

The project can be regarded as a “strategic master” in marketing and communication. They are not only good at viral marketing and viral communication, but also have a deep understanding and rich practical experience in decentralized finance (DeFi). Based on such a background and advantages, they have ingeniously turned social relationships into a dynamic and liquid automated market maker (AMM) market.

The early cold start of the project was simple. They crazily traded on the base to cause abnormal on-chain data, attracting some attention. With the entry of Cobie and other OGs, the social network became popular.

The design of the product mechanism is not only innovative, but also shows great potential in practical applications. In the long run, this may change our traditional understanding of social networks and financial interactions. However, due to its simple and crude implementation method, it brings some problems to user privacy.

Novel Experiment Points

Tokenizing Social Networks

What happens when you buy or sell shares?

1. KOL needs to buy their first share, and then others can buy. The act of buying is equivalent to adding liquidity to the KOL’s shares with ETH. Liquidity, as a data relationship, is stored in the contract. (No tokens are created in this process, only liquidity is constructed in the functions of the smart contract)

2. The contract stores the data relationship, that is, which wallet the purchased shares belong to and the quantity purchased. The centralized server synchronously records this relationship by listening to on-chain transaction events (Events).

Let’s use an example to illustrate the entire liquidity change:

Currently, Cobie’s share buy price is 1.0080625 ETH. If you spend 1.0080625 ETH to buy, at this time, 90% of the liquidity (0.90725625 ETH) is added to the pool, and 10% is collected by friend.tech and KOL.

After your purchase, the buy price increases, and the new buy price is 1.024 ETH, but the sell price at this time is 0.99225 ETH.

If you sell immediately (buy and then sell), when you sell, although the marked price is 0.99225 ETH, you can actually only receive 90% of the sell price, which is 0.893025 ETH. Similarly, 10% is collected by friend.tech and KOL.

In other words, through these operations, you incurred a loss of -0.115038 ETH, which was contributed to Friend tech and KOL as charity…

Product Features

1. Invite only

Currently in beta version, users can only register with an invitation code, using a scarcity marketing strategy similar to Clubhouse back in the day.

2. PWA to Mobile Only

Users can only use Friend tech on mobile web.
Friend tech utilizes the long-forgotten PWA technology (learn more here). Dapps do not support PC usage, can only be used on mobile devices, and after installing PWA (adding the current webpage to the home screen of a mobile browser), users can enter the product registration process.

3. Self-custodial wallet

A new wallet is automatically generated for each user upon registration, and the private key can be exported. privy.io is used as the wallet provider.

4. Holders’ chat room

Each person’s chat room is divided into two types:

If you are the room owner, everyone who buys your share is in the same chat room.
If you are a visitor, after buying a specific person’s share, you can join that person’s chat room. After selling the share, you no longer have the right to enter.

Game Arbitrage Strategy

Liquidity Model:

Since each KOL’s share does not have an automated market maker (AMM), the share price is calculated using the following bonding curve formula (invented by Friend tech):

y = x^ 2 / 16000

Where:

– y represents the price calculated in ETH.

– x represents the current total supply of shares.

Profit Model:

See this table for details (highly recommended to open and take a look).

Arbitrage Strategy

To further explain the overall profit changes, let’s go back to the first example:

The current buy price for Cobie’s share is 1.0080625 ETH. You spend 1.0080625 ETH to buy it, at which point 90% of the liquidity (0.90725625 ETH) is added to the pool, and 10% is collected by Friend tech and KOL.

After your purchase, the buy price increases, and the new buy price is 1.024 ETH, but the sell price at this time is 0.99225 ETH.

If you sell immediately at this point, although the marked price is 0.99225 ETH, you can actually only receive 90% of the selling price, which is 0.893025 ETH. Similarly, 10% is collected by Friend tech and KOL.

In other words, through these operations, you incurred a loss of -0.115038 ETH, which was contributed to Friend tech and KOL as charity…

This means that if you want to arbitrage, you must wait for the price to be high enough, that is, after you, there are constantly new buyers entering. How many buyers are there? According to the calculation in the model, in this example, your buying position is at 127th, until the total number of shares reaches 135, at most 8 more people enter, and you start to make a profit when you sell, with a profit of 0.00196 ETH. Before that, you were losing money when you sold.

This is a conclusion of the profit rule derived from the profit model, which is influenced by the buying position and the total number of shares:

When the buying position is between 1 and 18 (that is, the buying price is less than 0.02025 ETH), the total number of shares = the buying position + 2, and you start to make a profit;
When the buying position is between 19 and 36 (that is, the buying price is between 0.02025 ETH and 0.081 ETH), the total number of shares = the buying position + 3, and you start to make a profit;
When the buying position is between 37 and 55 (that is, the buying price is between 0.081 ETH and 0.1890625 ETH), the total number of shares = the buying position + 4, and you start to make a profit;
When the buying position is between 56 and 73 (that is, the buying price is between 0.1890625 ETH and 0.3330625 ETH), the total number of shares = the buying position + 5, and you start to make a profit;
……

Privacy Risks and Scams

Privacy Leak:

Leakage of Twitter users’ on-chain wallet addresses

Details and analysis:

1. The relationship between Twitter ID and Friend tech’s user wallet is exposed. Friend tech’s query API is public and directly exposed on the website. Anyone can query the user’s Twitter and Friend tech wallet address through the API.

2. The address of Friend tech’s wallet leads to the exposure of the user’s wallet on Ethereum. Because most of Friend tech’s wallet accounts are user-initiated cross-chain transaction transfers through their own wallets on Ethereum, by indexing the information of cross-chain transactions, all user wallets that have been recharged to Friend tech will be fully exposed.

The following is the process diagram of the entire relationship cracking. (It was first discovered by Twitter user @0x foobar and carried out information mining. Based on this, 0x foobar developed a set of contracts and web pages, allowing users to directly purchase specific Twitter users’ shares from Friend tech’s official contract through their own contracts and convert the shares into ERC 20 tokens.)

Website made by foobar: https://friends-wrap-v-01.vercel.app/

Friend tech shares ERC 20 Factory contract address: 0x68250Bf6d105Fe33f3120C5AfF385160d54EB5F2

Counterfeit Points Token Scam

The points of Friend tech are currently centralized, please do not trust the tokens on the blockchain, they are all scams

As of August 20, 2023, fake FTP tokens have appeared on the blockchain:

https://basescan.org/token/0x15ee7ed4d18d2205967168ac5604ff50d54bbfeb (it’s fake, don’t be deceived)

friend.tech