BitClout is a controversial service that tokenizes Twitter users almost without permission. It has $170M in BTC raised from other sources (Jeff John Roberts/Decrypt).
What is BitClout? Twitter’s Social Media Experiment is causing controversy
BitClout’s creator claims it is a new way of monetizing a following. The brightest stars of Crypto Twitter are not perplexed.
Some prominent users of Crypto Twitter discovered that they had another profile on BitClout. However, there are people selling and buying tokens to represent their identities. It doesn’t matter if the profiles are from people who have never used the social network.
“The core insight behind BitClout was that you can combine speculation and content to create a 10x product that allows creators to monetize in innovative ways, but also a new business model that is not ad-driven,” BitClout’s lead developer, Diamondhands told CoinDesk over a telephone call.
BitClout does not represent a company. It is a proof of work blockchain that can be used to run social media. It was created anonymously by a group of developers. Its token, BTCLT, is only held by its backers. However, prominent crypto investors and businesses have purchased.
Many prominent industry figures have not been persuaded by this. They seem to be particularly opposed to having their Twitter profiles and images scraped onto another website.
BitClout, which is social media on a Blockchain (such as Hive or Steem) is social media. It generates social tokens, such as Roll and Rally. These tokens represent real people. The supply of social tokens is controlled by automated market makers, such as Uniswap and Curve. However, one is governed by a bonding curve that increases the token’s value as more tokens are minted.
To do anything on the site users must have BTCLT. To trade, you need to put BTC in order to receive BTCLT. However, it is impossible to trade it back. BitClout users can send BTC to BitClout to get BTCLT, but they cannot trade it back to BTC via the site.
James Prestwich is the founder of Summa ( purchased by Celo operators last summer). He has been critical of BitClout and that’s one reason.
Prestwich said that BitClout cannot be sold in any venue. “You can’t put money in, but you can’t get it out.”
Diamondhands stated that the platform is open to exchange listings and bridges with other blockchains. It also includes exchanges among its investors and hopes listing should be possible soon.
Diamondhands stated, “It’s only a matter of time until everybody sees the right side to history,”
Diamondhands stated that there was a premise of 2,000,000 BTCLT tokens available for investors and founders. He explained that although there is no supply limit on BTCLT, the cost of new emissions will eventually become so high that they won’t expect more to be bought after the supply reaches around 19 million.
The network’s miners will also be able to earn BTCLT. However, that amount is only about 500,000 for the next few years.
BitClout sought support from major crypto investors to convince creators this wasn’t a project that would take BTC and run with it.
Diamondhands sent CoinDesk an email list with investors, which included Sequoia and Andreessen Horowitz as well as TQ Ventures and Coinbase Ventures. The list also included Polychain, Pantera, Digital Currency Group (CoinDesk’s parent company), Huobi, Variant, and others.
Diamondhands stated that he and his coworkers felt the need for well-known names to help them feel more confident about their project.
BitClout uses a proof of work blockchain similar to Bitcoin’s but designed to store the text of social media posts. The BTCLT token serves as gas and will be used eventually in a governance process to manage the project’s BTC treasury. Diamondhands stated that the code will soon be available on BitClout and others will be able to join permissionless as nodes, or miners when that happens.
CoinDesk has agreed to honor pseudonymity during our discussions. Diamondhands stated that the creators of the project are concealing their identities to preserve the project’s spirit and facts.
Although crypto social networks are not new in the cryptocurrency world, Diamondhands asserts that BitClout’s key innovation is its emphasis on the creator and not their content.
“The platforms that exist today really focus on speculation on the post as an atomic unit rather than the creator,” Diamondhands said. Diamondhands stated that posts are very short-term. It is not a very exciting asset class. If you have a creator you can speculate on, it’s something you can invest in for a long period of time.
While the idea of creativity and increasing one’s worth is powerful, others see a darker side.
Lumi, a blockchain researcher, has been deepening his knowledge of BitClout ever since BitClout started driving conversation last Wednesday, just after its launch.
Lumi said that people are incentivized not to cancel people during a telephone conversation. All you need to do is to open a brief position and then try to manipulate someone’s reputation.”
He also objected the BitClout’s qualitative experience. To send money to a cryptocurrency address to receive tokens back is in the same spirit as the 2017 initial coin offering rush. He doesn’t like seeing those optics returning to the space. Only with marquee names.
However, the lure of an existing pool that has already earned value could be tempting.
Reserved accounts allow creators to keep a portion of their tokens for activation. Users don’t have to wait for their account to activate before they can speculate on these tokens. This could explain why so many Crypto Twitter users are nervous about this project.
An ex-CoinDesk employee has already two dozen BitClout accounts and has yet to activate their BitClout account.
This reporter’s profile, which has not been activated yet and has not sold any tokens, is listed as having a $12,000 market capital.
This is based on the assumption that 32 tokens were minted and kept aside for @BradyDale. It would cost about $400 to purchase one more token, so the market cap assumes that all 33 would be available for sale. (Each token sold slightly increases its price. As if all the supplies were available at that price, the market cap is listed on the website.
However, the whitepaper explains this:
“Buying creates coins, pushing up the price and locking money in the profile. While selling destroys coins, pushing down the price and unlocking the profile’s money,”
It seems reasonable to conclude that market caps for tokens are exaggerated, at the very least. Prestwich stated that this is designed to quickly show people paper gains so they can put more money into BitClout.
“I don’t think it’s a scam, but. People use that term too loosely,” Nic Carter from Castle Island Ventures, who has not activated his account or invested, told CoinDesk. It certainly has some Ponzi-like features. But, it does have everything. Gamification is part of every consumer app. Frequent flier miles can be considered a Ponzi scheme.
How to get in
To create an account on Twitter, users don’t have to be there. However, to activate a reserved one, users need to tweet their BitClout address. Diamondhands stated that this verifies legitimate owners. However, the publicity is also helpful.
After an account is activated, the owner can set up a tax on token emission. If someone purchases a token that increases the total supply, a portion of it would be paid to the token’s owner.
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Crypto denizens and celebrities with preloaded accounts will see that they have some of their tokens saved for them. According to Diamondhands, the amount was determined based on their followers. The pre-loaded accounts were all based on Twitter and had approximately 15,000 members.
A BitClout page without a blue check next means that the person it represents is not yet activated on the Blockchain. However, all of their basic content from Twitter is there.
Diamondhands stated that the site currently requires an invitation from a user in order to be accessed. However, this will change soon. A user does not have to link an account with a Twitter account. It is possible to buy tokens directly from wallets and remain anonymous if you prefer.
Diamondhands stated that BitClout allows you to be anonymous which is something most platforms don’t allow.
Diamondhands stated, “What got me excited over the project was what I call fundamental demand’ which is where the creator monetizing the platform is actually the driving force of the value.”
BitClout users and the posts they make on BitClout provide an underlying data structure to which any web application can have access. Nodes are sites that provide BitClout content for people to interact with. Sites can use this open data structure to create new ways for creators or to give incentives to people to hold their tokens.
Diamondhands believes that there will be no larger objections as exchange listings allow people to exit positions and create new experiences for their users. It is also open for bridges to other chains.
He stated that any platform that wants to implement an Atomic Swap from BitClout onto its chain would be so amazing.