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Friend.tech’s Total Value Locked (TVL) has experienced a significant decline recently, marking its largest single-day decrease of 7.8% in early October, which reflects a notable downturn in its performance.
Moreover, there has been a considerable redemption of keys on Friend.tech, with reports of ongoing SIM swap attacks raising concerns about the network’s security.
Significant Decline in Friend.tech TVL
A data and research analyst, Tom Wan, recently shared an X thread revealing the substantial drop in the new network’s TVL, as illustrated by Dune analytics. According to the tweet on Oct. 4, the network faced its most considerable single-day decline in TVL, losing approximately 2.3K Ethereum.
Data from DefiLlama indicates that the Base-based platform saw its Total Value Locked (TVL) decrease from 29.19K ETH to 27.14K ETH on Oct. 4. This decline was part of a series of TVL reductions that began on Oct. 3, with a drop of around 1.30K ETH. By early Oct. 6, the TVL had further decreased to 26.48K ETH.
Notably, the largest TVL drop occurred on Oct. 4, with a reported reduction of about 7.8%, as stated by Tom Wan. Despite the TVL decline, idle capital remained stable at 10.34K ETH (approximately $17M) on Oct. 4, as the redeemed keys were completely withdrawn from the network.
Further reports suggest that even with the TVL decrease, the amount of available capital did not diminish, indicating that users might reenter the market at any time.
Key Redemptions Reach New Levels
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Tom Wan’s thread emphasized the statistics related to key redemptions. Sept. 14 marked the peak, with an impressive 6.7K ETH worth of keys redeemed. However, it is important to note that 6.9K ETH worth of keys were minted during the same timeframe.
On Oct. 4, there was a significant increase in key redemption, achieving a new high of approximately 2.1K ETH, valued at $3.5 million, as mentioned in the thread.
When users redeem their keys, they have the option to either retain the Ethereum within the app or withdraw it entirely from the system. On Oct. 4, users who redeemed their keys opted to withdraw the funds from their accounts, resulting in no increase in idle capital within the network.
Chang, one of the largest key holders, is among those who have been redeeming. Reports indicate that the individual sold 43 of his keys, realizing profits of around 140 ETH ($232K).
This selling activity caused a notable price drop in the key, falling from 3.89 ETH per key to 2.64 ETH.
Nevertheless, Chang’s profits remain in his FT account. He spent 77 ETH minting new keys on Oct. 4, with 39 ETH used to repurchase 15 of his keys at a reduced price of 2.27 ETH.
According to reports, the recent and ongoing SIM swap issue is responsible for the abrupt decline in TVL. Reports suggested that a scammer could potentially earn $387K in Ethereum through SIM swap attacks targeting the network’s users.
Following numerous complaints that arose a few days ago, Friend.tech upgraded its system to incorporate login removal options. However, Tom Wan noted that the recent wave of withdrawals and TVL declines is primarily attributed to the SIM swap attacks.
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