Proof of Stake
The App Layer: Friend.Tech on Base
BitOoda Ethereum Market Research, 8/24/23
Vivek Raman
The streak of abnormally low volatility in ETH price abruptly came to an end over the past week, with ETH breaking down from its summer doldrums range of $1750-$1850 and falling as low as $1550 as a cascade of liquidations washed leverage out of the market. There was no crypto-specific catalyst that drove the pullback, and the biggest macro crypto catalysts (potential ETF decisions for ETH futures and BTC, BTC halving, ETH hard fork for increased scalability) remain farther in the future.
However, while the crypto market structure remains markedly bearish and has been notably underperforming the darling Nasdaq stocks from a price perspective, underlying fundamental growth in the Ethereum ecosystem continues to be robust. Last week, we discussed Coinbase’s launch of Base, a permissionless Layer 2 accessible to a wide range of users.
However, it is important to note that L2s (like their underlying L1s, such as ETH) are infrastructure. And while infrastructure is important to scale and increase blockchain capacity, ultimately blockchains need a robust app layer to give users a reason to live onchain. Just like the Apple App Store needs killer apps, L2s need killer protocols.
Why could Ethereum and the L2 ecosystem ultimately rival (or even surpass) the size of the Apple App store? Apple’s App Store is a gated ecosystem that is not technology-neutral and therefore does not permit innovation. Ethereum / L2s are permissionless environments that foster innovation across all sectors – from finance/money (DeFi) to gaming to digital ownership of art (NFTs) to social media. The latter is what we saw last week – the fast rise of a social media app called Friend.Tech that reimagines the incentives and structures of social media.
How does Friend.Tech work? The premise is quite novel – users sign up by connecting their Twitter/X account to Friend.Tech. After signing up, anyone can buy “keys” that represent “shares,” in another user on the platform – the more people who buy a user’s “keys,” the higher the price (denominated in ETH). Why would anyone buy “keys” of another user on Friend.Tech? Because owning “keys” of a user grants access to a private chat room with that user. The more demand there is for access to a user, the higher the price the user’s “keys” will go, which allows for financial betting on different users and effectively creates a monetization avenue for having a social media presence.
While this sounds like a gamified way to speculate on people’s popularity, that is what the social media sector is about. However, in this case, instead of all revenues going to the tech company (e.g., Meta, Twitter/X), Friend.Tech implements a revenue share where 50% of the trading fees of a user’s keys go to the user. Hence, the more trading activity around a user’s share, the more money the user makes, incentivizing users to produce more content or be more active in their chats and unlocking new content potential.
Social media over the past decade has been centralized to a few kingmaker platforms, and the revenues largely sit with the big tech companies. Using crypto incentives and an open social media platform like Friend.Tech (which needs to be on an ETH L2 to allow for immediate programmatic monetization) can reimagine the social media space. This model could extend past just a chat app to the Instagram model (users can monetize their photo/video content), the LinkedIn model (users can allocate meetings / time by value of their shares), and other social media avenues.
Ultimately, blockchains need unique apps that give users incentives to onboard onchain – Friend.Tech is a great start!
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The streak of abnormally low volatility in ETH price abruptly came to an end over the past week, with ETH breaking down from its summer doldrums range of $1750-$1850 and falling as low as $1550 as a cascade of liquidations washed leverage out of the market. There was no crypto-specific catalyst that drove the pullback, and the biggest macro crypto catalysts (potential ETF decisions for ETH futures and BTC, BTC halving, ETH hard fork for increased scalability) remain farther in the future.
However, while the crypto market structure remains markedly bearish and has been notably underperforming the darling Nasdaq stocks from a price perspective, underlying fundamental growth in the Ethereum ecosystem continues to be robust. Last week, we discussed Coinbase’s launch of Base, a permissionless Layer 2 accessible to a wide range of users.
However, it is important to note that L2s (like their underlying L1s, such as ETH) are infrastructure. And while infrastructure is important to scale and increase blockchain capacity, ultimately blockchains need a robust app layer to give users a reason to live onchain. Just like the Apple App Store needs killer apps, L2s need killer protocols.
Why could Ethereum and the L2 ecosystem ultimately rival (or even surpass) the size of the Apple App store? Apple’s App Store is a gated ecosystem that is not technology-neutral and therefore does not permit innovation. Ethereum / L2s are permissionless environments that foster innovation across all sectors – from finance/money (DeFi) to gaming to digital ownership of art (NFTs) to social media. The latter is what we saw last week – the fast rise of a social media app called Friend.Tech that reimagines the incentives and structures of social media.
How does Friend.Tech work? The premise is quite novel – users sign up by connecting their Twitter/X account to Friend.Tech. After signing up, anyone can buy “keys” that represent “shares,” in another user on the platform – the more people who buy a user’s “keys,” the higher the price (denominated in ETH). Why would anyone buy “keys” of another user on Friend.Tech? Because owning “keys” of a user grants access to a private chat room with that user. The more demand there is for access to a user, the higher the price the user’s “keys” will go, which allows for financial betting on different users and effectively creates a monetization avenue for having a social media presence.
While this sounds like a gamified way to speculate on people’s popularity, that is what the social media sector is about. However, in this case, instead of all revenues going to the tech company (e.g., Meta, Twitter/X), Friend.Tech implements a revenue share where 50% of the trading fees of a user’s keys go to the user. Hence, the more trading activity around a user’s share, the more money the user makes, incentivizing users to produce more content or be more active in their chats and unlocking new content potential.
Social media over the past decade has been centralized to a few kingmaker platforms, and the revenues largely sit with the big tech companies. Using crypto incentives and an open social media platform like Friend.Tech (which needs to be on an ETH L2 to allow for immediate programmatic monetization) can reimagine the social media space. This model could extend past just a chat app to the Instagram model (users can monetize their photo/video content), the LinkedIn model (users can allocate meetings / time by value of their shares), and other social media avenues.
Ultimately, blockchains need unique apps that give users incentives to onboard onchain – Friend.Tech is a great start!
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Vivek Raman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
The streak of abnormally low volatility in ETH price abruptly came to an end over the past week, with ETH breaking down from its summer doldrums range of $1750-$1850 and falling as low as $1550 as a cascade of liquidations washed leverage out of the market. There was no crypto-specific catalyst that drove the pullback, and the biggest macro crypto catalysts (potential ETF decisions for ETH futures and BTC, BTC halving, ETH hard fork for increased scalability) remain farther in the future.
However, while the crypto market structure remains markedly bearish and has been notably underperforming the darling Nasdaq stocks from a price perspective, underlying fundamental growth in the Ethereum ecosystem continues to be robust. Last week, we discussed Coinbase’s launch of Base, a permissionless Layer 2 accessible to a wide range of users.
However, it is important to note that L2s (like their underlying L1s, such as ETH) are infrastructure. And while infrastructure is important to scale and increase blockchain capacity, ultimately blockchains need a robust app layer to give users a reason to live onchain. Just like the Apple App Store needs killer apps, L2s need killer protocols.
Why could Ethereum and the L2 ecosystem ultimately rival (or even surpass) the size of the Apple App store? Apple’s App Store is a gated ecosystem that is not technology-neutral and therefore does not permit innovation. Ethereum / L2s are permissionless environments that foster innovation across all sectors – from finance/money (DeFi) to gaming to digital ownership of art (NFTs) to social media. The latter is what we saw last week – the fast rise of a social media app called Friend.Tech that reimagines the incentives and structures of social media.
How does Friend.Tech work? The premise is quite novel – users sign up by connecting their Twitter/X account to Friend.Tech. After signing up, anyone can buy “keys” that represent “shares,” in another user on the platform – the more people who buy a user’s “keys,” the higher the price (denominated in ETH). Why would anyone buy “keys” of another user on Friend.Tech? Because owning “keys” of a user grants access to a private chat room with that user. The more demand there is for access to a user, the higher the price the user’s “keys” will go, which allows for financial betting on different users and effectively creates a monetization avenue for having a social media presence.
While this sounds like a gamified way to speculate on people’s popularity, that is what the social media sector is about. However, in this case, instead of all revenues going to the tech company (e.g., Meta, Twitter/X), Friend.Tech implements a revenue share where 50% of the trading fees of a user’s keys go to the user. Hence, the more trading activity around a user’s share, the more money the user makes, incentivizing users to produce more content or be more active in their chats and unlocking new content potential.
Social media over the past decade has been centralized to a few kingmaker platforms, and the revenues largely sit with the big tech companies. Using crypto incentives and an open social media platform like Friend.Tech (which needs to be on an ETH L2 to allow for immediate programmatic monetization) can reimagine the social media space. This model could extend past just a chat app to the Instagram model (users can monetize their photo/video content), the LinkedIn model (users can allocate meetings / time by value of their shares), and other social media avenues.
Ultimately, blockchains need unique apps that give users incentives to onboard onchain – Friend.Tech is a great start!
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Vivek Raman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
In this report, we offer a variety of institutional frameworks to analyze ETH, alongside BTC, as a part of a diversified crypto portfolio. Bitcoin has transcended into the mainstream, accelerated by the acceptance of spot BTC ETFs. ETH, while more complex, has unique use cases that could position it as a premier crypto asset alongside BTC.