Friends With Benefits is a V.I.P. lounge for crypto’s creative class. Is it empty hype or the future of friendship?
Erin Woo and
Erin Woo, a tech reporter, reported from Los Angeles. Kevin Roose, a tech columnist, is starting a crypto podcast.
On a recent afternoon, nine members of the crypto social club Friends With Benefits sat in the historic Bradbury Building in downtown Los Angeles, testing out a new beverage — a flavored, sparkling yerba maté that the group had developed with a coffee company.
As members sipped from their glasses, Joey Rubin, a leader of the group’s Los Angeles chapter, explained that the drink contained adaptogens, herbs said to increase focus and stimulate creativity.
There were some blank stares. Adapto-what-nows?
“It makes your soda $6 instead of $2,” Mr. Rubin explained.
He was joking, but it was a decent metaphor for the organization, and for the state of cryptocurrency, as a whole. Like most things in the crypto world these days, Friends With Benefits — a group that has been compared to a “decentralized Soho House” and a V.I.P. lounge for crypto’s creative class — is succeeding at generating hype and making money.
But its rise has onlookers wondering whether proponents of web3 — a vision of a new internet, organized on decentralized databases known as blockchains — are building something of real value, or whether it’s mostly just overpriced fizz.
Friends With Benefits is what’s known as a decentralized autonomous organization, or DAO — a kind of digital co-op that uses cryptocurrency tokens to coordinate access, make payments and vote on group decisions.
DAOs, which have been described as “financial flash mobs” or “group chats with bank accounts,” are among the fastest-growing parts of the crypto ecosystem. There are thousands of DAOs organized around a variety of causes, from managing decentralized crypto exchanges to bidding on historic copies of the Constitution. The largest DAOs have thousands of members, and some control billions of dollars’ worth of cryptocurrency.
Friends With Benefits is not the biggest DAO, but it has become one of the buzziest. It has nearly 6,000 unique token holders, including musicians like Erykah Badu and Azealia Banks. Last year, it raised $10 million from investors such as the venture capital firm Andreessen Horowitz in a funding round that valued it at $100 million.
The group was started in 2020 when Trevor McFedries, a digital entrepreneur, got the idea for an online club for his friends in the art and music worlds, with a private chat room that they would use special cryptocurrency tokens to unlock.
“I wanted a place for my creative peers who were so skeptical of tech and finance to have a little light at the end of the tunnel,” he said.
Mr. McFedries’s theory — which he tested by creating a token called $FWB and sending it to some of his Twitter followers — was that attaching cryptocurrency to an online social club would give members an incentive to make it a fun, interesting place to hang out. The more fun people were having, he thought, the more newcomers would want to join, and the more valuable their tokens would become.
With Friends With Benefits, “what you’re getting is vibes,” he said. “This token is starting to reflect some of the value of those vibes.”
The group’s rapid growth soon attracted investors, who saw Friends With Benefits less as a fully formed start-up than a crowd of crypto enthusiasts from which the next great web3 ventures might emerge. In a blog post announcing its investment, Andreessen Horowitz compared the group to the merchants of 13th-century Venice and the Homebrew Computer Club, the Silicon Valley hobbyist group where Steve Jobs and Steve Wozniak debuted the Apple computer in 1976.
“This is like being able to sit in 2005, web2 era, and be part of a community that has the chance to build the next Facebook or Twitter,” said Steve Jang, the founder and managing partner of Kindred Ventures, which invested $1.5 million in Friends With Benefits.
To join, applicants are vetted by a committee of current members. If approved — only about 20 percent are — they receive certain perks based on how many of the group’s in-house $FWB token they own.
Members with at least one $FWB token (current price: about $45) can read the group’s newsletter and blog posts. Local membership, which requires holding at least five tokens, comes with limited access to the group’s chat rooms on Discord, a talking and texting app, as well as entry to offline events. Global membership costs 75 $FWB — roughly $3,400 today — and includes access to all Discord chat rooms. (Friends With Benefits lent a Times reporter five $FWB tokens in order to view the Discord chats; those tokens have been returned, and the reporter does not have a stake in the organization.)
The group has chapters in New York, Los Angeles and London, but its real headquarters is its Discord server, where members swap outfit-of-the-day photos on the #selfies-n-fits channel, share financial advice on #trading-stonks and #taxes, and debate new proposals for community governance, such as a recent proposal to spend $20,000 from the group’s treasury to develop a members-only subscription coffee service. (As with most DAOs, major group decisions are voted on by token holders and recorded permanently on the Ethereum blockchain.)
Culturally, the membership skews less “Lamborghini-driving Bitcoin bros” and more “D.J.s from Williamsburg who dabble in Ethereum on the weekend.” In a recent orientation session, new members introduced themselves: an intellectual-property lawyer, a poet-slash-investor, a brand strategist for Nike, a handful of musicians and software engineers.
“We’re kind of the anti-crypto crypto club,” Raihan Anwar, a founder of Friends With Benefits, told the newbies.
Being organized as a DAO, rather than a traditional corporation, has advantages. The group can easily take stakes in members’ projects, or reward them with $FWB tokens for contributing useful work. Members can leave anytime by selling their tokens. And if the price of $FWB rises, every member stands to benefit.
But attaching a community to a volatile crypto token has risks. Last year, a service that Friends With Benefits used to create its tokens was hacked. $FWB’s value plunged 99 percent. The community voted to issue a replacement token and avoided a total collapse. Still, $FWB tokens now trade at around $50, roughly 75 percent lower than their peak.
Alex Zhang, 26 — a former concert promoter who serves as the group’s top leader, or “mayor” — acknowledged that the drop in $FWB’s price had worried some of the group’s leaders.
“It’s the elephant in the room,” he said. “We’re like, is this indicative of our performance?”
But he said owning a token together had given members a reason to cooperate to solve problems, rather than infighting or jostling for power.
“There’s so much value being created right now in FWB,” Mr. Zhang said. “People are launching NFT projects together, they’re starting companies together. The value of friendships — that’s all now being captured by the network.”
Mr. Zhang, who described the group as a “headless media community lifestyle brand,” predicts that members will eventually release dozens of projects under the Friends With Benefits umbrella, including magazines, music festivals and apparel lines.
A glossary. Cryptocurrencies have gone from a curiosity to a viable investment, making them almost impossible to ignore. If you are struggling with the terminology, let us help:
Bitcoin. A Bitcoin is a digital token that can be sent electronically from one user to another, anywhere in the world. Bitcoin is also the name of the payment network on which this form of digital currency is stored and moved.
Blockchain. A blockchain is a database maintained communally, that reliably stores digital information. The original blockchain was the database on which all Bitcoin transactions were stored, but non-currency-based companies and governments are also trying to use blockchain technology to store their data.
Cryptocurrencies. Since Bitcoin was first conceived in 2008, thousands of other virtual currencies, known as cryptocurrencies, have been developed. Among them are Ether, Dogecoin and Tether.
Coinbase. The first major cryptocurrency company to list its shares on a U.S. stock exchange, Coinbase is a platform that allows people and companies to buy and sell various digital currencies, including Bitcoin, for a transaction fee.
Crypto finance. The development of cryptocurrencies spawned a parallel universe of alternative financial services, known as Decentralized Finance, or DeFi, allowing crypto businesses to move into traditional banking territory, including lending and borrowing.
NFTs. A “nonfungible token,” or NFT, is an asset verified using blockchain technology, in which a network of computers records transactions and gives buyers proof of authenticity and ownership. NFTs make digital artworks unique, and therefore sellable.
“We’re talking to everyone from Reebok to Hennessey,” he said. “We’re able to help cross those bridges and explain what the potential of crypto and web3 could do to these spaces.”
As Friends With Benefits has grown, it has encountered some of the same problems that might roil any offline social club. Last year, members voted to remove Cooper Turley, a crypto-world influencer, after decade-old, bigoted tweets of his surfaced.
And some members have struggled to reconcile the utopian rhetoric of crypto — a tool for democratizing the financial system and removing gatekeepers and middlemen, supposedly — with the reality of an exclusive members club that costs thousands of dollars to join.
“Social clubs are one thing with expected elitism, but at least they don’t front like they’re inclusive,” said Amelia Elle, a New York fashion designer. She joined the group after hearing that influential artists and creatives were involved but said spending time in the group’s Discord server had been disappointing.
“If we actually look at the active channels, it’s a lot of men in start-ups who play an instrument or two,” she said.
Mr. Zhang acknowledged that “crypto inherently has a level of exclusivity to it.” But he said the group prided itself on being more accessible, and more diverse, than most crypto-focused spaces.
“We as a community have prioritized and put forth many initiatives to be as inclusive toward individuals that match our values as possible,” he said.
So far, most of what Friends With Benefits has produced has been geared toward throwing parties and growing its membership, but it is beginning to branch out. The group is developing a member directory with customizable NFT name badges, planning a music festival and starting a fellowship program for web3 creators from underrepresented backgrounds.
In December, members voted to invest $18,530 from the DAO’s treasury to develop the yerba maté drink, its first physical product. Once the drink is ready, they plan to promote it at Friends With Benefits events before selling to a broader audience.
The group is also in talks to buy a stake in a defunct Chinese restaurant in Los Angeles, which it plans to turn into a hub. The restaurant, Hop Louie, was a Chinatown standby for decades before closing in 2016.
After the January meeting, half a dozen Friends With Benefits members visited the restaurant for the first time, wandering through the darkened upstairs and ducking around wooden lanterns still hung with red tassels. Spencer Kushner and Freddy Braidi, restaurateurs from the Boulevard Nightlife Group, which will operate the restaurant, walked them through the space’s history and what a revitalized Hop Louie could look like.
The members speculated excitedly about the prospect. Mr. Rubin, the only one with restaurant industry experience, talked about keeping the revenue within the Friends With Benefits ecosystem or building wealth for the restaurant’s employees — applying the decentralized ownership structure of the DAO to an offline venture.
But like the rest of the DAO’s activities, he noted, “it could be shut down in a single vote.”
There was one final stop that night: a private dinner, where two chefs known professionally as BellyMan roasted crickets and grilled Wagyu beef over an open flame in a converted alleyway. A few dozen Friends With Benefits members milled around. Most were in their late 20s to early 40s; one couple toted their infant in a sling carrier.
Surveying the space, Laura Jaramillo, a product designer at the NFT start-up Upshot and a member of the product team for Friends With Benefits, summed up the group’s heady optimism:
“We’re on the ground floor of what could be the beginning of everything.”
Friends With Benefits Social Club Runs On Crypto and Vibes – The New York Times