As you all know, Friend.Tech is the latest social media platform, built on Base - the Ethereum layer-2 rollup of Coinbase. But is it all it's cracked up to be? Some people are starting to worry that Friend.Tech is a Ponzi scheme... Let's have a look.
Technically, a Ponzi scheme is a fraudulent investment operation where investors are promised high returns with little or no risk. The scheme works by using money from new investors to pay off old investors, creating the illusion of a successful investment.
There are a few reasons why people are concerned that Friend.Tech is a Ponzi scheme. First, the platform requires users to invest ETH in order to buy shares (or keys) of a group based on a Twitter profile. They charge 10% in fees per transaction - 5% for the platform, 5% for the owner of the profile. Therefore, if the number of owners of the shares you bought does not increase, you will sell the shares at a lower price than what you initally bought.
Second, the number of groups on Friend.Tech is growing rapidly, and hence most groups will have a low number of owners, and once these few owners get bored by the platform they will dump their shares what will reduce the value of these small group shares to almost nothing.
Third, there is no clear way to value group shares. This means that investors are essentially betting on the future success of the platform, without knowing precisely what else they can propose. If fact the current hype is mostly due to the backer (Paradigm) and the potential airdrop...
Despite these similarities between Friend.Tech and Ponzi schemes, I think that Friend.Tech is not technically a Ponzi scheme since it does not seem to be a fraudulent operation. However, if you're thinking about investing in Friend.Tech, it's important to do your research and understand the risks involved.
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