In the kingdom of the blind, the one-eyed man is king. BaseCoinbase’s layer 2 on Ethereum, has been a constant topic of discussion. This new field of opportunity for crypto investors has not been slow to attract attention. After the mysteries surrounding memecoin BALDthe social network Friend.tech enters the dance with allegations scheme of Ponzi weighing heavily on the platform.
Friend.tech: the protocol worth $3 billion
The protocol, backed by influential Twitter (X) accounts such as NBA star Grayson Allen, has surpassed entities, such as Tron and Uniswapin just 10 days. Indeed, this crypto application, which links a Base address to Twitter and trades shares in social network profiles belonging to friends, already has its records.
In less than 24 hours, the platform has generated costs worth 1.42 million dollars. Another remarkable figure underlines Friend.tech’s success: a sum of 3 billion dollars has been raised since the launch of the platform.
According to Dune Analytics data, the protocol has recorded a total volume of 36,260 ETHequivalent to approximately 60.6 million dollarsto current price of Ether (ETH)through 1.4 million transactions.
In addition, by offering free points and organizing a airdrop every Fridaythe platform plans to reward its users for this triumph. However, one wonders whether these rewards aren’t a little too generous to be credible.
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Friend.Tech: Ponzi or not Ponzi?
Since yesterday many questions hover over the protocol and the accusations are flying. It would appear that Friend.tech is in fact a Ponzi scheme.
As a reminder, a Ponzi scheme is a fraudulent investment scheme in which the financial returns promised to investors come primarily from funds brought in by new investors, rather than from legitimately generated profits. The scheme is based on the idea of continually recruiting new participants, who are enticed to invest money with the promise of high and rapid returns.
The crypto protocol that burns your wings
Skeptics have voiced their reservations, drawing attention to the mechanism in place and the risks of collapse of this pyramid. More specifically, they highlight theinstability inherent in the functioning of the protocol already visible.
After the excitement of the first few days wears off, users start selling their shares, triggering a panic that could ultimately lead to the protocol’s collapse. Excessive share growth could also trap investors in their downfall, once the value of these shares fell.
This is known as the « pump and dump. In other words, this is where thepyramidal aspect. When you buy shares in a network, their value increases. The only way to generate profits is to get new investors to participate via your account, so you can continue to increase the value of these shares.
In this way, you profit from other people’s money without providing any real incentive for users to stay on the platform. As a result, without an incentive, people will sell during the bull phase, where some will make big gainswhile many others will suffer significant losses.
As you will have gathered, as a loyal reader of the Journal du Coin, this business seems doomed to failure. It’s now clear that there’s no such thing as easy money or extraordinary profits, attractive when the market cries tears of bloodoften conceal less glamorous realities. Caution is therefore called for.
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