The Protocol: Friend.tech Fades as Crypto Craze, but Ethereum Is Scaling

Last week in The Protocol, we talked about the frenzy that was happening on the Friend.tech app, atop Coinbase’s Base blockchain – and made the point that, like a lot of crypto crazes, it might pass quickly. That appears to be happening now.

But there is a lesson here from looking at Ethereum fees – that the largest smart-contracts blockchain’s plan for scaling via the addition of supplemental “layer-2” networks might be paying off. Lyllah Ledesma has the feature.

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Activity has slumped on the Friend.tech platform “as quickly as it rose,” according to the analysis firm Messari. (Messari)

FICKLE FRIEND.TECH: The social marketplace Friend.tech, which went viral after being launched a few weeks ago on Coinbase’s new Base blockchain, is now at risk of being discarded as the latest crypto has-been. According to a Dune Analytics dashboard, the number of buys and sells on the platform plunged in the past week along with prices for shares or keys in listed influencers. The analysis firm Messari, in a report titled, “An End to the Friendzy,” estimated that the number of traders was down 40% off their peak, and users complained of high feeds and slow load times. “As quickly as it rose, activity on Friend.tech has cooled off,” according to the firm. There might be a second act, however: Decrypt reported that creators of adult (and often explicit) content from the website OnlyFans were flocking over to the Friend.tech platform, after it enabled the sending of photos to “key holders.”

BINANCE BUZZ: There’s been a lot of news over the past week on the big U.S. crypto exchange – some of it good, some not so good, some neutral. The overarching theme is that the company expanded rapidly in recent years, and now it’s facing intense scrutiny from regulators, having to retrench in some business lines and regions, while pivoting in others. Binance this week cut ties with five sanctioned Russian banks listed on the exchange’s peer-to-peer service for transferring funds in rubles. The move came just days after the Wall Street Journal reported that Binance was enabling peer-to-peer trades of rubles for digital tokens, frequently involving banks on Western blacklists – a popular method for Russians to transfer money abroad. Binance said it was discontinuing its crypto-backed debit card in Bahrain and Latin America, where it has been available for less than a year. According to Reuters, Mastercard decided to end the programs. Then on Tuesday, Binance announced it had launched a new crypto-based program Send Cash that will allow users in nine Latin American countries to transfer money directly into friends’ and family members’ bank accounts in Colombia and Argentina. In Belgium, Binance has been ordered to cease operations by the country’s local regulator, but customers can continue using the exchange via a Polish entity. On the trading side, Binance announced that, starting Wednesday, it would offer “T+3” daily options contracts allowing traders to bet on the BNB token over a three-day period. The BNB token has been volatile this year, falling recently to a one-year low (get update on this). Market observers have long speculated that Binance might attempt to prop up the token’s value by selling bitcoin (BTC), but exchange CEO Changpeng “CZ” Zhao has said it wasn’t the case. Binance and Zhao were sued by the SEC in June, accused of offering unregistered securities to the general public allowing for commingling of customer funds, along with other violations of securities laws. ByteTree, a research firm, wrote this week that Binance was “in the crosshairs,” adding that its share of global crypto exchange trading volume has slid to about 45%, from 64% six months earlier.

Bitstamp said it would shut down its ether staking service in the U.S. as of Sept. 25 due to regulatory scrutiny of the practice, which the Securities and Exchange Commission has likened to investment contracts. The crypto exchange Kraken agreed in February to end its staking-as-a-service platform for U.S. customers and pay $30 million to settle SEC allegations it offered unregistered securities.

Magnate Finance, a lending and borrowing platform on Coinbase’s new Base blockchain, appears to have rug-pulled users out of $6.5 million, just hours after the blockchain sleuth ZachXBT warned on X (Twitter) that the project might be a scam – based on data records tying Magnate to an earlier $4.8 million exit scam known as Solfire, Cointelegraph reported.

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Ether (ETH), the native cryptocurrency of the Ethereum blockchain, is up 44% in 2023, but August has not been a strong month. The CoinDesk Smart Contract Platform Index (SMT), which includes Ethereum as well as projects like Optimism and Algorand, is down roughly 10% so far this month. The most notable outlier is Hedera Hashgraph’s HBAR, which shot up in price after the U.S. Federal Reserve’s instant payments platform FedNow added "Dropp," a Hedera-based micropayments platform, as a service provider. The HBAR token was sitting on a 10% gain for August.

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